To whom are the Insurance Proceeds payable with respect to any Casualty at a Churchs Chicken location?
Churchs_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
ation of Lease. Notwithstanding the foregoing, if the building comprising the Premises is damaged or destroyed during the last lease year of the then Term, including any Extension Period, and the cost of restoring such damage or destruction exceeds fifty percent (50%) of the then replacement value of the building, fixtures and improvements comprising the Premises, as reasonably determined by Sublessor, exclusive of the cost of the foundation, and an Event of Default shall not have occurred and be continuing, then Sublessee shall have the right to terminate this Sublease by giving notice of such termination ("Termination Notice") to Sublessor within thirty (30) days after the occurrence of such Casualty, in which event this Lease shall be deemed terminated effective as of the later of the date (i) such Termination Notice is delivered to Sublessor, (ii) Sublessee vacates the Premises following such
Casualty, and (iii) Sublessor receives all proceeds of any insurance payable with respect to such Casualty and Sublessee has paid to Sublessor an amount equal to the insurance deductible applicable to such Casualty and the cost of restoration resulting from such Casualty which was not covered by insurance. If this Sublease is terminated pursuant to this subsection, Rent and all other charges and costs payable hereunder shall be adjusted and paid to the effective date of termination. Such termination shall not limit Sublessee's obligations under this Sublease arising or accruing prior to the effective date of such termination and/or which by the terms of this Sublease survive such termination. Notwithstanding the foregoing, in the event of a casualty during the last lease year of the Term of this Sublease at a time when there are unexercised renewal options in favor of Sublessee, and if Sublessee gives written notice to Sublessor of Sublessee's election to exercise the next available renewal option within thirty (30) days after the date of occurrence of such casualty, then such casualty shall be deemed not to have occurred during the last year of the Term of this Sublease, and the provisions of Section 13.3 above shall of applicable.
- (e) Application of Insurance Proceeds. All proceeds of insurance with respect to any Casualty (the "Insurance Proceeds") shall be payable to Sublessor, and Sublessee authorizes and directs any affected insurance company to make payment of the Insurance Proceeds directly to Sublessor. If Sublessee receives any Insurance Proceeds relat
Source: Item 23 — RECEIPT (FDD pages 68–406)
What This Means (2025 FDD)
According to Churchs Chicken's 2025 Franchise Disclosure Document, the insurance proceeds for any casualty at a franchised location are payable to the Sublessor. The franchisee (Sublessee) authorizes and directs the insurance company to make payments directly to the Sublessor. If the franchisee receives any insurance proceeds related to a casualty, they must promptly pay those proceeds to the Sublessor.
However, if no default has occurred and is continuing, the net insurance proceeds (after deducting costs, fees, and expenses incurred by the Sublessor and Sublessee in collecting the proceeds, including adjuster's and attorneys' fees) may be made available to the franchisee. If the net insurance proceeds are less than $50,000, they will be paid to the franchisee to be used for restoration costs. If the net insurance proceeds are $50,000 or greater, the Sublessor will hold and disburse the funds as the restoration progresses, to pay or reimburse the franchisee for restoration costs, provided certain conditions are met.
These conditions include that the restoration complies with all applicable laws and private restrictions, the amount requested has been paid or is due, there are no mechanic's liens, and if the estimated restoration cost exceeds the net insurance proceeds, the franchisee has deposited the excess amount into an escrow account satisfactory to the Sublessor. The balance of the net insurance proceeds, along with the escrow funds, must be sufficient to cover the remaining restoration costs. Once the Sublessor receives satisfactory evidence that the restoration is complete and paid for, any remaining balance of the net insurance proceeds will be retained by the Sublessor.
This arrangement ensures that insurance proceeds are initially controlled by the Sublessor, providing a level of security and oversight for the restoration process. The franchisee's access to these funds is contingent upon meeting specific requirements and demonstrating that the funds are being used appropriately for the restoration of the Churchs Chicken location. This process is designed to protect the interests of both the Sublessor and the Sublessee by ensuring that the restoration is completed in a compliant and financially sound manner.