Upon termination of the Development Agreement, does Chicken Guy retain the Development Fee?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
ale 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
Source: Item 23 — RECEIPTS (FDD pages 50–286)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, the Development Fee is fully earned by Chicken Guy when paid and is not refundable. The Development Fee is paid by the Developer at the time the Development Agreement is signed. The fee is equal to $50,000 per Franchised Restaurant that the Developer agrees to develop in the Development Territory during the Development Term. However, if the Developer agrees to develop three or more Franchised Restaurants, the Development Fee is reduced to $40,000 per Franchised Restaurant.
This means that if the Development Agreement is terminated, Chicken Guy keeps the Development Fee regardless of the reason for termination. The Development Fee is credited against the Initial Franchise Fees, which are payable pursuant to each Franchise Agreement executed. However, the aggregate amount of such credits cannot exceed the Development Fee.
For a prospective Chicken Guy developer, this policy means that the Development Fee is a non-refundable investment. It is important to carefully consider the development schedule and the ability to meet the obligations outlined in the Development Agreement before signing the agreement and paying the Development Fee. This policy is not uncommon in the franchise industry, as it compensates the franchisor for the initial work and investment in setting up the development agreement.