Does Cajun have the right of first refusal for a proposed Churchs Chicken franchise transfer?
Churchs_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
hisee is made available to potential investors, Franchisee, at its expense, shall deliver to Cajun a copy of the offering documents. Franchisee, at its expense, also shall deliver to Cajun an opinion of Franchisee's legal counsel (addressed to Cajun and in a form acceptable to Cajun) that the offering documents properly use
the Proprietary Marks and accurately describe Franchisee's relationship with Cajun and/or its affiliates. For each proposed offering, Franchisee shall pay Cajun a non-refundable fee in the amount of $10,000 or such greater amount as is necessary to reimburse Cajun for its reasonable costs and expenses associated with reviewing the proposed offering, including, but not limited to, legal and accounting fees. The indemnification provisions of Section 22 shall also include any losses or expenses incurred by Cajun and/or its affiliates in connection with any statements made by or on behalf of Franchisee in any public offering or private placement of Franchisee's securities.
I. Right of First Refusal
- (1) If any party holding any interest in Franchisee or in this Agreement receives a bona fide offer (as determined by Cajun in its reasonable discretion) from a third party or otherwise desires to undertake any Transfer that would require Cajun's approval (other than a sale of ownership interests in Franchisee to a spouse, parent, child or sibling), within 10 days after receipt of such offer or decision to undertake such proposed Transfer, the party shall notify Cajun in writing of the terms of the proposed Transfer, and shall provide such information and documentation relating to the proposed Transfer as Cajun may reasonably require. Cajun or its designee may elect to purchase the interest that the seller proposes to Transfer any time within 30 days after receipt of notification and all documents and other information required by Section 15.B., by sending written notice to the seller that Cajun or its designee intends to purchase the seller's interest on the same financial terms and conditions offered by the third party.
Source: Item 23 — RECEIPT (FDD pages 68–406)
What This Means (2025 FDD)
According to Churchs Chicken's 2025 Franchise Disclosure Document, Cajun, which appears to be the franchisor, has the right of first refusal regarding franchise transfers. If a franchisee receives a legitimate offer from a third party to transfer their interest in the franchise, or if the franchisee intends to undertake a transfer that requires Cajun's approval, they must notify Cajun in writing within 10 days. This notification must include the terms of the proposed transfer and any related information Cajun reasonably requires.
Cajun then has 30 days after receiving the notification and all necessary documentation to decide whether to purchase the franchisee's interest on the same financial terms offered by the third party. If the transfer involves multiple Churchs Chicken restaurants, Cajun can choose to purchase all or some of them. If Cajun decides to purchase the interest, the closing on the sale must occur within 60 days from the date of Cajun's notice to the seller.
However, even if Cajun chooses not to exercise its right of first refusal, this does not automatically mean the transfer is approved. Cajun still has the sole discretion to approve or deny the proposed transfer based on various factors. Furthermore, Cajun's failure to exercise its right of first refusal does not prevent them from exercising that right again if the transaction does not close within 6 months after Cajun initially declined to exercise its right.