Under what conditions will Chicken Guy permit an Affiliated Entity to execute the Franchise Agreement for a Franchised Restaurant in the Development Territory?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
Effect of Sale of Franchised Restaurant on Developer's Obligations.** If, during the Development Term, Developer sells a Franchised Restaurant that was developed pursuant to this Agreement, that Franchised Restaurant will continue to be counted as a Franchised Restaurant for the purpose of meeting Developer's obligations under the Development Schedule, provided that the sale has been approved by Chicken Guy and only so long as that restaurant continues to be operated pursuant to a franchise agreement with Chicken Guy or its affiliates.
- **D.
Execution of Franchise Agreements by Affiliated Entities.** At Developer's request, Chicken Guy will permit the Franchise Agreement for any Franchised Restaurant in the Development Territory to be executed by a corporation, a limited liability company or general or limited partnership formed by Developer to develop and operate the Franchised Restaurant ("Affiliated Entity"), provided all of the following conditions are met: (1) Developer, the Development Principal (defined in Section 8.G.) or Developer's Continuity Group (defined in Section 8.E.) owns at least 51% of the voting securities of a corporate Affiliated Entity, at least 51% of the membership interests in a limited liability company Affiliated Entity or all of the general partnership interests of a partnership Affiliated Entity; (2) the Affiliated Entity conducts no business other than the operation of the Franchised Restaurant; (3) Developer, the Development Principal, the members of Developer's Continuity Group and all holders of a legal or beneficial interest in Developer of 10% or more ("10% Owner(s)") agree to assume full and unconditional liability for, and agree to perform all obligations, covenants and agreements contained in the Franchise Agreement; and (4) all owners of voting securities of a corporate Affiliated Entity, membership interests of a limited liability company Affiliated Entity or partnership interests of a partnership Affiliated Entity possess a good moral character, as determined by Chicken Guy in its sole discretion, and Developer provides Chicken Guy all reasonably requested information to permit Chicken Guy to make such a determination.
Source: Item 23 — RECEIPTS (FDD pages 50–286)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, Chicken Guy will allow an Affiliated Entity (a corporation, limited liability company, or general or limited partnership formed by the Developer) to execute the Franchise Agreement for a Franchised Restaurant within the Development Territory if certain conditions are met.
Specifically, the Developer, the Development Principal, or the Developer's Continuity Group must own at least 51% of the voting securities of a corporate Affiliated Entity, at least 51% of the membership interests in a limited liability company Affiliated Entity, or all of the general partnership interests of a partnership Affiliated Entity. Additionally, the Affiliated Entity must conduct no business other than the operation of the Franchised Restaurant.
Furthermore, the Developer, the Development Principal, the members of the Developer's Continuity Group, and all holders of a legal or beneficial interest in Developer of 10% or more must agree to assume full and unconditional liability for all obligations in the Franchise Agreement. Finally, all owners of voting securities of a corporate Affiliated Entity, membership interests of a limited liability company Affiliated Entity, or partnership interests of a partnership Affiliated Entity must possess good moral character, as determined by Chicken Guy, and the Developer must provide all reasonably requested information to allow Chicken Guy to make that determination.