What conduct is a Churchs Chicken franchisee prohibited from after termination or expiration of the 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.
Source: Item 23 — RECEIPT (FDD pages 68–406)
What This Means (2025 FDD)
According to Churchs Chicken's 2025 Franchise Disclosure Document, following the transfer, expiration, or earlier termination of the Franchise Agreement, a franchisee is restricted from certain activities. For a period of one year, the franchisee cannot sell, assign, lease, or transfer the franchised location to any entity they know intends to operate a restaurant specializing in chicken or with a similar operation or trade dress to the Churchs Chicken system. This restriction is designed to prevent direct competition at the former location. The franchisee must include restrictive covenants in any conveyance documents to ensure compliance and make these restrictions a matter of public record.
Specifically, the franchisee is prohibited from having an ownership interest in any restaurant business (other than a Church's Restaurant) that specializes in the sale of fried chicken for a period of two years. This restriction applies if the competing restaurant is located at or within a 5-mile radius of the former franchised location or within a 5-mile radius of any existing or developing Churchs Chicken restaurant. These post-termination covenants aim to protect Churchs Chicken's market share and brand integrity by preventing former franchisees from immediately opening competing businesses in close proximity to existing Churchs Chicken locations.
It's important to note that these restrictions do not apply to any existing restaurant or foodservice operations the franchisee had before signing the agreement, as listed in Schedule 1 of the agreement, or to other restaurants franchised by Churchs Chicken or its affiliates. Churchs Chicken also retains the right to modify or reduce the extent of any covenant, effective immediately upon notice to the franchisee. If a court finds any restriction unenforceable, the parties intend for the court to modify the restriction to protect Churchs Chicken's legitimate business interests. The document also states that any period of noncompliance by the franchisee will not count towards the completion of the restrictive period, provided Churchs Chicken takes action to enforce the obligations within the restrictive period.