What constitutes a default of the Churchs Chicken Franchise Agreement regarding funds in the Account?
Churchs_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
- (5) Failure by Franchisee to have sufficient funds in the Account shall constitute a default of this Agreement pursuant to Section 18.B.(2).
Franchisee shall not be entitled to set off, deduct or otherwise withhold any Royalty Fees, advertising contributions, or any other monies payable by Franchisee under this Agreement on grounds of any alleged non-performance by Cajun or for any other reason.
Notwithstanding any direction by Franchisee regarding application of funds paid by Franchisee to Cajun (or to the Advertising Fund), Cajun may apply any payment made by Franchisee to any outstanding obligation owed by Franchisee or any affiliate of Franchisee, in Cajun's sole discretion.
Source: Item 23 — RECEIPT (FDD pages 68–406)
What This Means (2025 FDD)
According to Churchs Chicken's 2025 Franchise Disclosure Document, a franchisee's failure to maintain sufficient funds in the designated account constitutes a default of the Franchise Agreement. This is explicitly stated in Section 18.B.(2) of the agreement. This means Churchs Chicken franchisees must ensure they have enough money in their account to cover royalty fees, advertising contributions, and any other amounts owed to the company.
This requirement is significant because it gives Churchs Chicken a clear and immediate basis for declaring a default if funds are lacking. Defaulting on the agreement can lead to various penalties and even termination of the franchise. The franchisee is not allowed to withhold payments for any reason, including alleged non-performance by Churchs Chicken.
Churchs Chicken also retains the right to apply any payment made by the franchisee to any outstanding obligation, regardless of any specific instructions from the franchisee. This means that if a franchisee has multiple outstanding debts, Churchs Chicken can decide how to allocate the payment, potentially prioritizing older debts or those with higher interest rates. This level of control over payments underscores the importance of maintaining sufficient funds and staying current with all financial obligations to avoid default.