Under what circumstances can Chicken Guy terminate the Development Agreement without providing an opportunity to cure?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
torney's fees and other costs and expenses to which Chicken Guy is entitled pursuant to Section 22.E. Developer acknowledges that breach of the Covenants Against Competition by Developer shall cause irreparable harm to Chicken Guy in addition to monetary damages and nothing in this Section 12.D. shall preclude Chicken Guy from obtaining appropriate injunctive relief to enforce the Covenants Against Competition and specific performance to enforce this Section 12.D.
- E. Modification. Chicken Guy shall have the right, in its sole discretion, to reduce the scope of any covenant in this Section 12 effective immediately upon Developer's receipt of written notice, and Developer agrees that it shall comply forthwith with any covenant as so modified, which shall be fully enforceable notwithstanding the provisions of Section 20.
- F. Execution of Covenants by Third Parties. At Chicken Guy's request, Developer shall require and obtain the execution of covenants similar to those set forth in this Section 12 (including covenants applicable upon the termination of an individual's relationship with Developer) from all guarantors of Developer's obligations. Every covenant required by this Section 12.F. shall be in a form satisfactory to Chicken Guy, including, without limitation, specific identification of Chicken Guy as a third
party beneficiary of such covenants with the independent right to enforce them. Failure by Developer to obtain execution of a covenant required by this Section 12.F. shall constitute a material breach of this Agreement.
G. Applicability. The restrictions contained in this Section 12 shall apply to Developer and all guarantors of Developer's obligations. With respect to guarantors, these restrictions shall apply for a 1 year period after any guarantor ceases to be the Development Principal or an officer, stockholder, director, member of the Continuity Group or a 10% Owner. The restrictions contained in this Section 12 shall not apply to ownership of less than a 5% legal or beneficial ownership in the outstanding equity securities of any publicly held corporation by Developer or any guarantor of Developer's obligations. The existence of any claim Developer or any guarantor of Developer's obligations may have against Chicken Guy or its affiliates, whether or not arising from this Agreement, shall not constitute a defense to the enforcement by Chicken Guy of the covenants in this Section 12. The preceding sentence, however, does not constitute a waiver of any such claim.
13. TERMINATION
- A. Grounds for Termination. In addition to the grounds for termination that may be stated elsewhere in this Agreement, Chicken Guy may terminate this Agreement, and the rights granted by this Agreement, upon written notice to Developer without an opportunity to cure upon the occurrence of any of the following events:
- (1) Developer fails to obtain Chicken Guy's written approval of a site by the applicable site approval date listed in the attached Data Sheet.
- (2) At any time during the Development Term, Developer fails to have open and operating the number of Franchised Restaurants required by the Development Schedule.
- (3) Developer begins construction of a Franchised Restaurant before Developer has received a fully-executed Franchise Agreement for that location.
- (4) Developer is insolvent or is unable to pay its creditors (including Chicken Guy); files a petition in bankruptcy, an arrangement for the benefit of creditors or a petition for reorganization; there is filed against Developer a petition in bankruptcy, an arrangement for the benefit of creditors or petition for reorganization, which is not dismissed within 60 days of the filing; Developer makes an assignment for the benefit of creditors; or a receiver or trustee is appointed for Developer and not dismissed within 60 days of the appointment.
- (5) Execution is levied against Developer's business or property; suit to foreclose any lien or mortgage against the premises or equipment of any Franchised Restaurant developed hereunder is instituted against Developer and is not dismissed within 60 days; or the real or personal property of any Franchised Restaurant developed hereunder shall be sold after levy thereupon by any sheriff, marshal or constable.
- (6) There is a material breach by Developer of any obligation under Section 12.
- (7) Any Transfer that requires Chicken Guy's prior written approval occurs without Developer having obtained that prior written approval.
Source: Item 23 — RECEIPTS (FDD pages 50–286)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, there are several specific instances where the Development Agreement can be terminated without an opportunity to cure. These include failing to obtain written approval for a site by the specified date, not having the required number of restaurants open and operating according to the Development Schedule, or beginning construction before a Franchise Agreement is fully executed. These stipulations emphasize the importance of adhering to the agreed-upon development timeline and procedures.
Additional grounds for termination without cure involve financial instability, such as insolvency, bankruptcy filings, or assignment for the benefit of creditors. Legal and ethical breaches, such as a material breach of obligations under Section 12, unauthorized transfers, material misrepresentations, or omissions in provided information, can also lead to immediate termination. Furthermore, criminal convictions of key individuals associated with the developer can trigger termination without a cure period.
Chicken Guy also reserves the right to terminate the agreement without an opportunity to cure if the developer knowingly falsifies reports, makes material misrepresentations, or fails to disclose material facts. If a developer has received two or more notices of default within a 12-month period, Chicken Guy can terminate the agreement upon the next default without providing an opportunity to remedy it. These terms highlight the critical importance of transparency, legal compliance, and financial stability for Chicken Guy developers.
It is important to note that if any applicable law or regulation requires a longer notice or cure period than what is specified in the agreement, the agreement will be amended to conform to the minimum requirements of that law or regulation. This ensures that the termination process adheres to all legal standards, providing an additional layer of protection for the developer.