Under what condition is it unlawful for Chicken Guy to repurchase a franchisee's business during the term of the franchise agreement?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
- (h) A provision that requires the franchisee to resell to the franchisor items that are not uniquely identified with the franchisor.
This subdivision does not prohibit a provision that grants to a franchisor a right of first refusal to purchase the assets of a franchisee on the same terms and conditions as a bona fide third party willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants the franchisor the right to acquire the assets of a franchisee for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the franchise agreement and has failed to cure the breach in the manner provided in subdivision (c).
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 40–46)
What This Means (2025 FDD)
According to the 2025 Chicken Guy FDD, a specific condition exists under Minnesota law that makes it unlawful for Chicken Guy to require a franchisee to resell items to them. This condition applies when the items are not uniquely identified with the Chicken Guy brand.
This provision aims to protect franchisees from being forced to sell back generic inventory or assets to Chicken Guy at potentially unfavorable terms. The law makes an exception, however, for situations where Chicken Guy has a right of first refusal to purchase the franchisee's assets, matching the terms of a legitimate offer from a third party. Also, Chicken Guy can acquire the assets at market or appraised value if the franchisee has breached the franchise agreement and failed to correct the breach.
For a prospective Chicken Guy franchisee in Minnesota, this means they cannot be forced to resell generic items back to the franchisor. However, this protection does not prevent Chicken Guy from purchasing the entire business or specific assets under certain, fair-market conditions or in cases of a breach of contract by the franchisee.