Is there a geographical limitation on the non-compete restriction during the term of the Chicken Guy franchise agreement?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
- (3) During the term of this Agreement, there is no geographical limitation on this restriction.
Following the expiration or earlier termination of the term of this Agreement, this restriction shall apply within the Protected Area and within 2 miles of any then-existing Chicken Guy!
Restaurant, except as otherwise approved in writing by Chicken Guy.
This restriction shall not apply to Franchisee's existing restaurant or foodservice operations, if any, which are identified in the attached Data Sheet, nor shall it apply to other restaurants operated by Franchisee that are franchised by Chicken Guy or its affiliates.
- (4) If any part of these restrictions is found to be unreasonable in time or distance, each month of time or mile of distance may be deemed a separate unit so that the time or distance may be reduced by appropriate order of the court to that deemed reasonable.
If, at any time during the 1-year period following expiration or earlier termination of this Agreement, Franchisee fails to comply with its obligations under this Section, that period of noncompliance will not be credited toward Franchisee's satisfaction of the 1-year obligation.
- (5) Franchisee further covenants and agrees that, for a period of 1 year following the expiration or earlier termination of this Agreement, Franchisee will not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, firm, partnership, corporation, or other entity, sell, assign, lease or transfer the Franchised Location to any person, firm, partnership, corporation, or other entity which Franchisee knows, or has reason to know, intends to operate a restaurant business at the Franchised Location that would violate Sections 21.C.(2)(c) or 21.C.(3).
Franchisee, by the terms of any conveyance selling, assigning, leasing or transferring its interest in the Franchised Location, shall include these restrictive covenants as are necessary to ensure that a restaurant business that would violate Sections 21.C.(2)(c) or 21.C.(3) is not operated at the Franchised Location for this 1 year period, and Franchisee shall take all steps necessary to ensure that these restrictive covenants become a matter of public record.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to the 2025 Chicken Guy FDD, during the term of the franchise agreement, there is no geographical limitation on the non-compete restriction. This means that while you are operating a Chicken Guy franchise, the non-compete applies regardless of location.
However, after the franchise agreement expires or is terminated early, the non-compete restriction applies within the franchisee's Protected Area and within 2 miles of any then-existing Chicken Guy restaurant. This post-term restriction is subject to written approval from Chicken Guy, which could potentially modify the geographical limitations. The agreement also specifies that the restriction does not apply to the franchisee's existing restaurant or foodservice operations, if any are identified in the Data Sheet, or to other restaurants operated by the franchisee that are franchised by Chicken Guy or its affiliates.
It's also stipulated that if any part of these restrictions is found to be unreasonable in terms of time or distance, the time or distance may be reduced by a court order to what is deemed reasonable. Furthermore, if the franchisee fails to comply with the non-compete obligations during the 1-year period following expiration or termination, the period of noncompliance will not count towards fulfilling the 1-year obligation.
Additionally, for one year after the agreement expires or terminates, the franchisee cannot sell, assign, lease, or transfer the franchised location to anyone they know intends to operate a restaurant business that would violate the non-compete terms. The franchisee must include these restrictive covenants in any conveyance documents to ensure compliance and make them a matter of public record.