Under what condition will the Chicken Guy franchise agreement automatically terminate?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
- 3. Term. Section 2.A.(2) is deleted and replaced with the following:
- (2) Notwithstanding the foregoing, this Agreement shall automatically terminate if Franchisee's contract to provide foodservice at the Facility terminates or expires without renewal. In addition, Franchisee may terminate this Agreement following 60 days' written notice to Chicken Guy if Franchisee's client at the Facility instructs Franchisee in writing to cease operating the Franchised Restaurant (provided Franchisee has exercised reasonable efforts to arrange a meeting between Franchisee's client and Chicken Guy, if Chicken Guy so elects, to discuss the continued operation of the Franchised Restaurant). If Franchisee's contract to provide foodservice at the Facility permits Franchisee's client to take this action on shorter notice, the notice period provided in that contract shall govern, provided Franchisee has provided Chicken Guy a copy of the relevant contract provision.
Source: Item 23 — RECEIPTS (FDD pages 50–286)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, the franchise agreement will automatically terminate if the franchisee's contract to provide foodservice at a facility terminates or expires without renewal. This condition applies specifically to franchisees operating in non-traditional locations, such as those within facilities like airports or universities, where their right to operate is contingent upon a service agreement with the facility owner.
This provision protects Chicken Guy by ensuring that its brand presence in a non-traditional location does not continue if the franchisee loses the right to operate in that location. It also allows Chicken Guy to find a new franchisee for that location without legal complications. The franchisee may also terminate the agreement with 60 days written notice to Chicken Guy if the franchisee's client at the Facility instructs the franchisee in writing to cease operating the Franchised Restaurant, provided the franchisee has exercised reasonable efforts to arrange a meeting between the franchisee's client and Chicken Guy.
For a prospective Chicken Guy franchisee considering a non-traditional location, this automatic termination clause is a critical point to consider. The franchisee's investment and business continuity are directly tied to the foodservice contract with the facility. It would be prudent to carefully evaluate the terms and renewal conditions of the foodservice contract, and potentially negotiate terms that provide more security for the franchisee's business. Franchisees should also maintain open communication with the facility client and Chicken Guy to address any potential issues that could lead to termination.