Can Chicken Guy unreasonably withhold consent for a transfer of interest in the Chicken Guy agreement?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
- (1) Developer understands and acknowledges that the rights and duties set forth in this Agreement are personal to Developer, that Chicken Guy has entered into this Agreement in reliance on Developer's business skill, financial capacity, personal character, experience and demonstrated or purported ability in developing and operating high quality foodservice operations and that Chicken Guy has entered into this Agreement with the understanding that, except as otherwise reserved by Chicken Guy in Section 2, Developer and/or its Affiliated Entities will be the only franchisee of Chicken Guy in the Development Territory during the Development Term. Accordingly, neither Developer nor any immediate or remote successor to any part of Developer's interest in this Agreement, nor any individual, partnership, corporation or other legal entity which directly or indirectly controls Developer shall sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any interest in Developer, this Agreement or any other assets pertaining to Developer's operations under this Agreement (collectively "Transfer") without the prior written consent of Chicken Guy, which consent shall not be unreasonably withheld. Chicken Guy shall be free to withhold consent to any Transfer, without consideration of the factors listed in Section 10.B., if Developer does not propose to Transfer the same interest with respect to all agreements with Chicken Guy in the Development Territory.
Source: Item 23 — RECEIPTS (FDD pages 50–286)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, under certain conditions, Chicken Guy will not unreasonably withhold consent for a transfer of interest. Specifically, Section 10.A.(1) states that Chicken Guy's consent shall not be unreasonably withheld for the sale, assignment, transfer, conveyance, pledge, mortgage, or encumbrance of any interest in the Developer, the agreement, or assets pertaining to the Developer's operations. However, Chicken Guy is free to withhold consent if the Developer does not propose to transfer the same interest with respect to all agreements with Chicken Guy in the Development Territory.
This provision offers some protection to the franchisee, ensuring that Chicken Guy cannot arbitrarily deny a transfer request. However, the franchisee must still meet specific conditions and provide necessary information for the transfer to be considered. Chicken Guy retains the right of first refusal, meaning they have the option to purchase the interest themselves before allowing a transfer to a third party.
It is important for a prospective Chicken Guy franchisee to understand the conditions under which a transfer can be approved or denied. The franchisee should carefully review Section 10 of the franchise agreement to fully understand their rights and obligations regarding transfers. Furthermore, the franchisee should maintain compliance with all agreements with Chicken Guy to avoid any potential issues with transfer approvals.