In the context of a transfer of a Churchs Chicken franchise, what happens if the franchisee has outstanding obligations related to the franchised restaurant?
Churchs_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
Cajun reserves the right to require that a reasonable sum of money be placed in escrow to ensure that all of these obligations are satisfied.
(5) Franchisee is not then in material default of any provision of this Agreement or any other agreement between Franchisee and Cajun or its affiliates and is not in default beyond the applicable cure period under any real estate lease, equipment lease or financing instrument relating to the Franchised Restaurant.
(6) Franchisee, all individuals who executed this Agreement and all guarantors of Franchisee's obligations must execute a general release and a covenant not to sue, in a form satisfactory to Cajun, of any and all Claims (as defined in Section 16) against Cajun and its affiliates and their respective past and present officers, directors, shareholders, agents and employees, in their corporate and individual capacities, including, without limitation, Claims arising under federal, state and local laws, rules and ordinances, and including, without limitation, Claims arising out of, or relating to, this Agreement or any other agreements between Franchisee and Cajun.
Source: Item 23 — RECEIPT (FDD pages 68–406)
What This Means (2025 FDD)
The 2025 Churchs Chicken Franchise Disclosure Document addresses the franchisee's obligations during a transfer. Specifically, the franchisee must not be in material default of any provision of the Franchise Agreement or any other agreement with Churchs Chicken or its affiliates. This also extends to not being in default beyond any applicable cure period under any real estate lease, equipment lease, or financing instrument related to the franchised restaurant.
To ensure these obligations are met, Churchs Chicken reserves the right to require that a reasonable sum of money be placed in escrow. This escrow serves as a security measure to ensure that all outstanding obligations are satisfied before the transfer is finalized.
Furthermore, all individuals who initially executed the Franchise Agreement and any guarantors of the franchisee's obligations must execute a general release and a covenant not to sue, in a form satisfactory to Churchs Chicken. This release covers any and all claims against Churchs Chicken and its affiliates, including their officers, directors, shareholders, agents, and employees, in both their corporate and individual capacities. These claims include those arising under federal, state, and local laws, rules, and ordinances, as well as those related to the Franchise Agreement or any other agreements between the franchisee and Churchs Chicken.