After the Development Agreement is terminated, what is the geographic scope of the non-competition covenant for a Churchs Chicken developer?
Churchs_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in Development Agreement | Summary |
|---|---|---|
| r. Non-Competition Covenants After the Development Agreement is Terminated or Expires | §14 | Post-term, non-competition covenants include a 2-year ban on owning any restaurant business that specializes in selling fried chicken within the Development Area or within a 5-mile radius of any Restaurant that is then in existence (which restriction does not apply to your existing Restaurants, if any, or to other restaurants you operate that are franchised by us or our affiliates). With respect to individual owners, the same covenant is contained in § 4 of the Guaranty Agreement. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 50–55)
What This Means (2025 FDD)
According to Churchs Chicken's 2025 Franchise Disclosure Document, the post-term non-competition covenant for developers lasts for two years. This covenant restricts a former developer from owning any restaurant business that specializes in selling fried chicken. The geographic scope of this restriction includes the Development Area and extends to a 5-mile radius of any Churchs Chicken restaurant in existence at the time of termination or expiration of the Development Agreement.
However, this restriction does not apply to any existing restaurants the developer owns at the time of termination, nor does it apply to other restaurants the developer operates that are franchised by Churchs Chicken or its affiliates. This means a developer can continue to operate existing Churchs Chicken franchises or other affiliated franchise concepts without violating the non-compete agreement.
This non-competition covenant also applies to individual owners through a similar covenant contained in the Guaranty Agreement. This ensures that individual owners associated with the development entity are also bound by the same restrictions, preventing them from circumventing the non-compete by operating a competing fried chicken restaurant individually.
For a prospective Churchs Chicken developer, it's crucial to understand the implications of this post-term non-competition covenant. If the Development Agreement is terminated or expires, the developer will be restricted from operating a competing fried chicken restaurant within the defined geographic area for two years. This could impact future business opportunities and should be carefully considered before entering into a Development Agreement with Churchs Chicken.