Under what condition can the cross-guarantee requirement for a Chicken Guy franchisee with interest in other Chicken Guy restaurants be waived?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
- (3) If Franchisee, any guarantor or any parent, subsidiary or affiliate of Franchisee holds any interest in other restaurants that are franchised by Chicken Guy or its affiliates, the party who owns that interest shall execute, concurrently with this Agreement, a form of cross-guarantee to Chicken Guy and its affiliates for the payment of all obligations for such restaurants, unless waived in writing by Chicken Guy in its sole discretion. For purposes of this Agreement, an affiliate of Franchisee is any company controlled, directly or indirectly, by Franchisee or Franchisee's parent or subsidiary.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, if a franchisee or its affiliates hold interests in other Chicken Guy restaurants, they are generally required to execute a cross-guarantee for the payment of all obligations for those restaurants. However, Chicken Guy retains the sole discretion to waive this requirement in writing. This means that while a cross-guarantee is typically expected, Chicken Guy can choose to forgo it on a case-by-case basis.
For a prospective franchisee, this implies that if you have or plan to have ownership in multiple Chicken Guy locations, you should anticipate being asked to provide a cross-guarantee. This guarantee would make you responsible for the financial obligations of all Chicken Guy restaurants in which you hold an interest. However, it also opens the possibility of negotiating a waiver with Chicken Guy, although the FDD does not specify the conditions under which a waiver might be granted.
Since the waiver is at Chicken Guy's discretion, it is important for potential franchisees to discuss this requirement with the franchisor during their due diligence. Understanding the factors that Chicken Guy considers when deciding whether to grant a waiver can be a crucial part of assessing the financial risks and obligations associated with owning multiple Chicken Guy franchises. Franchisees should inquire about the specific circumstances under which Chicken Guy has granted waivers in the past and what criteria they use to evaluate such requests.