Under what circumstances can Chicken Guy demand assurances, such as security or letters of credit, from a franchisee regarding their obligations?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
- (4) In addition to the other provisions of this Section 22.B., if Chicken Guy reasonably determines that Franchisee becomes or will become unable to meet its obligations to Chicken Guy or its affiliates under this Agreement, Chicken Guy may provide Franchisee written notice to that effect and demand that Franchisee provide those assurances reasonably designated by Chicken Guy, which may include security or letters of credit for the payment of Franchisee's obligations to Chicken Guy and its affiliates.
If Franchisee fails to provide the assurances demanded by Chicken Guy within 30 days after its receipt of written notice from Chicken Guy, this Agreement shall terminate without further notice to Franchisee effective immediately upon expiration of that time, unless Chicken Guy notifies Franchisee otherwise in writing.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, Chicken Guy can demand assurances from a franchisee if they reasonably determine that the franchisee is, or will become, unable to meet their financial obligations to Chicken Guy or its affiliates under the Franchise Agreement. These assurances may include security or letters of credit to cover the franchisee's obligations.
If Chicken Guy makes such a demand, it must provide written notice to the franchisee. The franchisee then has 30 days from receipt of the notice to provide the demanded assurances.
If the franchisee fails to provide the required assurances within the 30-day period, the Franchise Agreement will terminate immediately without further notice, unless Chicken Guy notifies the franchisee otherwise in writing. This clause gives Chicken Guy a mechanism to protect its financial interests if it perceives a heightened risk of non-payment from a franchisee.