Does Cajun have any restrictions on transferring its rights and obligations under the Churchs Chicken franchise agreement?
Churchs_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee further covenants that following the transfer, expiration or earlier termination of this Agreement, regardless of the cause for termination, Franchisee shall not, either directly or indirectly, for itself or through, on behalf of, or in conjunction with any person or entity, for a period of 1 year, sell, assign, lease or transfer the Franchised Location to any person or entity which Franchisee knows, or has reason to know, intends to operate a restaurant business at the Franchised Location that specializes in the sale of chicken or has a method of operation or trade dress similar to that employed in the System. Franchisee, by the terms of any conveyance selling, assigning, leasing or transferring its interest in the Franchised Location, shall include these restrictive covenants as are necessary to ensure that a restaurant business that would violate this Section 17.D.(3) is not operated at the Franchised Location for this 1-year period, and Franchisee shall take all steps necessary to ensure that these restrictive covenants become a matter of public record.
(4) The restrictions in Sections 17.D.(2)(b) and 17.D.(3)(a) shall not apply to Franchisee's existing restaurant or foodservice operations, if any, which are identified in Schedule 1, nor shall they apply to other restaurants operated by Franchisee that are franchised by Cajun or its affiliates. If a court finds that any restriction in Section 17.D. is not enforceable, it is the intent of the parties that the court modify such restriction to the extent reasonably necessary to protect the legitimate business interests of Cajun. If, at any time during the restrictive period following the transfer, expiration or earlier termination of this Agreement, Franchisee fails to comply with its obligations under this Section, that period of noncompliance will not be credited toward Franchisee's completion of the restrictive period provided that Cajun takes action to enforce the obligations under this Section within the restrictive period.
E. Modification. Cajun shall have the right, in its sole discretion, to reduce the extent of any covenant in this Section effective immediately upon Franchisee's receipt of notice, and Franchisee shall be bound by the covenant as so reduced, which shall be fully enforceable notwithstanding the provisions of Section 25.
Source: Item 23 — RECEIPT (FDD pages 68–406)
What This Means (2025 FDD)
The 2025 Churchs Chicken Franchise Disclosure Document outlines some restrictions regarding the transfer of rights and obligations, focusing primarily on the franchisee's actions post-transfer. Specifically, a franchisee is restricted from selling, assigning, leasing, or transferring the franchised location to any entity that intends to operate a similar chicken restaurant for a period of one year following the transfer, expiration, or termination of the agreement. This restriction is designed to protect Churchs Chicken's market position and brand identity.
To ensure compliance, the franchisee must include these restrictive covenants in any conveyance documents when selling, assigning, leasing, or transferring their interest in the franchised location. Furthermore, the franchisee is responsible for taking the necessary steps to make these covenants a matter of public record. This places a legal obligation on the franchisee to actively prevent a competing chicken restaurant from taking over the location shortly after they leave the Churchs Chicken system.
However, these restrictions do not apply to the franchisee's existing restaurant or foodservice operations that are already identified in Schedule 1 of the agreement, nor do they apply to other restaurants operated by the franchisee that are franchised by Cajun or its affiliates. This clause provides some flexibility for franchisees who have diversified business interests. Additionally, Cajun retains the right to reduce the extent of any covenant, providing them with the ability to adjust restrictions as they see fit, with immediate effect upon notice to the franchisee. This modification clause gives Churchs Chicken considerable control over the enforcement and scope of these transfer restrictions.