Under what circumstances is a cross-guarantee required for other restaurants franchised by Chicken Guy or its affiliates?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
ship interests of any member of the Continuity Group, Developer shall execute addenda to the attached Data Sheet to reflect the change. If Developer is a corporation, the Continuity Group shall at all times own at least 51% of the voting securities of Developer; if Developer is a limited liability company, the Continuity
Group shall at all times own at least 51% of the membership interests in Developer; and if Developer is a partnership, the Continuity Group shall at all times have at least a 51% interest in the operating profits and losses and at least a 51% ownership interest in Developer.
Source: Item 23 — RECEIPTS (FDD pages 50–286)
What This Means (2025 FDD)
According to the 2025 Chicken Guy Franchise Disclosure Document, a cross-guarantee is required if the developer, any guarantor, or any parent, subsidiary, or affiliate of the developer holds an interest in other restaurants franchised by Chicken Guy or its affiliates. In such cases, the party owning that interest must execute a cross-guarantee to Chicken Guy and its affiliates, ensuring the payment of all obligations for those restaurants. This requirement is concurrent with the signing of the Franchise Agreement. However, Chicken Guy retains the discretion to waive this requirement in writing.
In practical terms, this means that if a prospective Chicken Guy franchisee or any related entity already has financial ties to other Chicken Guy franchises, they will likely need to provide a cross-guarantee. This guarantee essentially makes them responsible for the financial obligations of those other franchises as well. This is a risk mitigation strategy employed by Chicken Guy to protect its brand and ensure financial stability across its franchise network.
For a prospective franchisee, this cross-guarantee requirement has significant implications. It means that their financial exposure isn't limited to just the new Chicken Guy franchise they are investing in. Instead, they could be held liable for the debts and obligations of other Chicken Guy restaurants owned by related parties. It is important to carefully evaluate the financial health of any affiliated Chicken Guy franchises before signing a cross-guarantee. Franchisees should also seek legal and financial advice to fully understand the risks and obligations associated with such a guarantee.
It is also important to note that Chicken Guy has the discretion to waive this requirement. Therefore, a prospective franchisee in this situation may want to negotiate with Chicken Guy to waive the cross-guarantee, especially if the other affiliated franchises are financially stable and well-managed. This clause highlights the importance of thorough due diligence and professional advice when considering a Chicken Guy franchise, particularly if the franchisee or its affiliates have existing interests in other Chicken Guy locations.