Is the Churchs Chicken Guaranty Agreement applicable to a corporation?
Churchs_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee shall comply with Section 15 prior to any change in ownership interests and shall execute addenda to Schedule 2 as changes occur in order to ensure the information contained in Schedule 2 is true, accurate and complete at all times**.**
- **D.
Restrictive Legend.** If Franchisee is a corporation, Franchisee shall maintain stop-transfer instructions against the transfer on its records of any voting securities, and each stock certificate of the corporation shall have conspicuously endorsed upon its face the following statement: "Any assignment or transfer of this stock is subject to the restrictions imposed on assignment by the Church's Texas Chicken Franchise Agreement(s) to which the corporation is a party." If Franchisee is a publicly-held corporation, these requirements shall apply only to the stock owned by Franchisee's Continuity Group (as defined in Section 13.E.).
If Franchisee is a limited liability company, each membership or management certificate or other evidence of interest in Franchisee shall have conspicuously endorsed upon its face the following statement: "Any assignment or transfer of an interest in this limited liability company is subject to the restrictions imposed on assignment by the Church's Texas Chicken Franchise Agreement(s) to which the limited liability company is a party." If Franchisee is a partnership, its written partnership agreement shall provide that ownership of an interest in the partnership is held subject to, and that further assignment or transfer is subject to, all restrictions imposed on assignment by this Agreement.
- **E.
Continuity Group.** Schedule 2 lists those persons and/or entities that Cajun and Franchisee have designated as Franchisee's "Continuity Group." In the event of any change in the Continuity Group or in the ownership interests of any member of the Continuity Group, Franchisee shall execute addenda to Schedule 2 to reflect the change.
The Continuity Group shall at all times own at least 51% of the voting securities of Franchisee (or if Franchisee is a partnership, the Continuity Group shall at all times have at least a 51% interest in the operating profits and losses and at least a 51% ownership interest in Franchisee).
F. Guarantees.
Source: Item 23 — RECEIPT (FDD pages 68–406)
What This Means (2025 FDD)
The 2025 Churchs Chicken Franchise Disclosure Document (FDD) indicates that if a franchisee is a corporation, certain requirements must be met regarding stock transfers. Specifically, the corporation must maintain stop-transfer instructions against the transfer of any voting securities on its records. Additionally, each stock certificate of the corporation must have a conspicuous statement indicating that any transfer of the stock is subject to the restrictions imposed by the Churchs Texas Chicken Franchise Agreement. However, if the franchisee is a publicly-held corporation, these requirements apply only to the stock owned by the franchisee's Continuity Group.
Furthermore, the FDD states that the franchisee must comply with Section 15 regarding changes in ownership interests and execute addenda to Schedule 2 to ensure the information remains accurate and complete. The Continuity Group, as designated by Cajun and the franchisee, must always own at least 51% of the voting securities of the franchisee. If the franchisee is a partnership, the Continuity Group must maintain at least a 51% interest in the operating profits and losses and a 51% ownership interest in the franchisee.
While the FDD excerpts discuss requirements related to corporations and other business entities, they do not explicitly state whether the Guaranty Agreement is applicable to a corporation. The excerpts focus more on the restrictions on stock transfers, the maintenance of ownership records, and the role of the Continuity Group. To determine if the Guaranty Agreement applies to a corporation, a prospective franchisee should review the full Guaranty Agreement and consult with Churchs Chicken or a legal advisor.