What constitutes a prohibited transfer under the Churchs Chicken Development Agreement that could lead to termination?
Churchs_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
12. TRANSFERS BY DEVELOPER
- A. No Assignment. Developer understands and acknowledges that the rights and duties set forth in this Agreement are personal to Developer, that Cajun has entered into this Agreement in reliance on Developer's(and Operating Principal's) business skill, financial capacity, personal character, experience and demonstrated or purported ability in developing and operating high quality foodservice operations. Accordingly, neither Developer nor any person or entity which directly or indirectly controls Developer shall sell, assign, transfer, convey, or give away any interest in Developer, this Agreement or any other assets pertaining to Developer's operations under this Agreement (collectively, "Transfer"), except as described in Section 12.B. or Section 12.C. Any purported Transfer, by operation of law or otherwise, shall be null and void.
- B. Transfers of Minority Interest. Notwithstanding
Source: Item 23 — RECEIPT (FDD pages 68–406)
What This Means (2025 FDD)
According to Churchs Chicken's 2025 Franchise Disclosure Document, the Development Agreement outlines specific restrictions on transferring interests, emphasizing that the agreement is personal to the developer. Churchs Chicken has entered the agreement based on the developer's business skills, financial capacity, character, experience, and ability to operate high-quality foodservice operations.
Therefore, any attempt to sell, assign, transfer, convey, or give away any interest in the developer entity, the Development Agreement itself, or any assets related to the developer's operations under the agreement is considered a prohibited transfer. This restriction applies to both direct and indirect transfers, including those occurring by operation of law. Any transfer that violates these terms will be deemed null and void, potentially leading to termination of the Development Agreement.
However, there are exceptions for transfers of minority interests as described in Sections 12.B and 12.C of the Development Agreement, which are not detailed in the provided excerpts. The developer must also maintain detailed records of ownership, including lists of owners, members, or partners and their respective ownership percentages, and comply with Section 12 before any change in ownership interests. Furthermore, if the developer is a corporation, it must maintain stop-transfer instructions against the transfer of any voting securities and include a restrictive legend on each stock certificate indicating that any transfer is subject to the restrictions imposed by the Churchs Chicken Development Agreement and Franchise Agreements.