What standards must a proposed transferee of a Chicken Guy franchise meet?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
oration or other legal entity which directly or indirectly controls Franchisee shall sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any interest in Franchisee, this Agreement, the Franchise, the Franchised Restaurant, the assets of the Franchised Restaurant, the Franchised Location or any other assets pertaining to Franchisee's operations under this Agreement (collectively "Transfer") without the prior written consent of Chicken Guy, which consent shall not be unreasonably withheld.
(2) Except as otherwise provided in this Agreement, any purported Transfer, by operation of law or otherwise, not having the prior written consent of Chicken Guy shall be null and void and shall constitute a material breach of this Agreement, for which Chicken Guy may terminate this Agreement without providing Franchisee an opportunity to cure the breach.
B. Transfer Considerations. Franchisee shall advise Chicken Guy in writing of any proposed Transfer, submit (or cause the proposed transferee to submit) a franchise application for the proposed transferee, and submit a copy of all contracts and all other agreements or proposals, and all other information requested by Chicken Guy, relating to the proposed Transfer. If Chicken Guy does not exercise its right of first refusal, the decision as to whether or not to approve a proposed Transfer shall be made by Chicken Guy in its reasonable business discretion and shall include numerous factors deemed relevant by Chicken Guy. These factors may include, but will not be limited to, the following:
(1) The proposed transferee (and if the proposed transferee is other than an individual, such owners of an interest in the transferee as Chicken Guy may request) must demonstrate that it has extensive experience in high quality restaurant operations of a character and complexity similar to the restaurants franchised by Chicken Guy or its affiliates; meets the managerial, operational, experience, quality, character and business standards for a franchisee promulgated by Chicken Guy from time to time; possesses a good character, business reputation and credit rating; has an organization whose management culture is compatible with Chicken Guy's management culture; and has adequate financial resources and working capital to meet Franchisee's obligations under this Agreement.
(2) The sales price shall not be so high, in Chicken Guy's reasonable judgment, as to jeopardize the ability of the transferee to develop, maintain, operate and promote the Franchised Restaurant and meet financial obligations to Chicken Guy, third party suppliers and creditors. Chicken Guy's decision with respect to a proposed Transfer shall not create any liability on the part of Chicken Guy: (a) to the transferee, if Chicken Guy approves the Transfer and the transferee experiences financial difficulties; or (b) to Franchisee or the proposed transferee, if Chicken Guy disapproves the Transfer pursuant to this Section 19 or for other legitimate business purposes. Chicken Guy, without any liability to Franchisee or the proposed transferee, has the right, in its reasonable business discretion, to communicate and counsel with Franchisee and the proposed transferee regarding any aspect of the proposed Transfer.
(3) All of Franchisee's accrued monetary obligations to Chicken Guy and its affiliates (whether arising under this Agreement or otherwise) and all other outstanding obligations related to the Franchised Restaurant (including, but not limited to, bills from suppliers, taxes, judgments and any required governmental reports, returns, affidavits or bonds) have been satisfied or, in the reasonable judgment of Chicken Guy, adequately provided for. Chicken Guy reserves the right to require that a reasonable sum of money be placed in escrow to ensure that all of these obligations are satisfied.
(4) Franchisee is not then in material default of any provision of this Agreement or any other agreement between Franchisee and Ch
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, a proposed transferee must meet several standards to be approved. The transferee (and certain owners, if applicable) must demonstrate extensive experience in high-quality restaurant operations similar to Chicken Guy franchises. They must also meet Chicken Guy's managerial, operational, experience, quality, character, and business standards for franchisees. A good character, business reputation, and credit rating are essential, along with a management culture compatible with Chicken Guy's. Finally, the transferee must possess adequate financial resources and working capital to meet the obligations of the Franchise Agreement.
In addition to these qualifications, the sales price must not be so high that it jeopardizes the transferee's ability to operate and promote the Chicken Guy restaurant or meet financial obligations to Chicken Guy, suppliers, and creditors. All of the current franchisee's accrued monetary obligations to Chicken Guy and its affiliates, as well as other outstanding obligations related to the restaurant, must be satisfied or adequately provided for, as determined by Chicken Guy. Chicken Guy may require a reasonable sum of money to be placed in escrow to ensure these obligations are met.
The current franchisee must not be in material default of any agreement with Chicken Guy or its affiliates, including lease agreements or vendor contracts. Furthermore, the franchisee, all individuals who executed the agreement, and all guarantors must execute a general release and a covenant not to sue Chicken Guy and its affiliates. Unless waived by Chicken Guy, the transferee and designated employees must complete the training program. The transferor must also pay Chicken Guy a nonrefundable transfer fee of $10,000 for reviewing the transfer application.
These conditions ensure that any new franchisee taking over a Chicken Guy location is well-qualified and financially stable, protecting the brand and the interests of other franchisees. The comprehensive requirements also aim to prevent any legal issues or outstanding debts from impacting the ongoing operation of the franchise. Prospective franchisees should carefully consider these requirements and ensure they can meet them before attempting to transfer their franchise.