How does the Churchs Chicken sublease agreement define 'Affiliate' in relation to the sublessee?
Churchs_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
Sublessee agrees to comply with all of the terms and conditions of any franchise agreement, development agreement, asset purchase agreement, promissory note, this Sublease and any guaranty, or other agreement entered into by Sublessee (collectively, the "Agreements"), any of its Affiliates (for the purposes of this Sublease, "Affiliate" shall mean any individual, group, association, limited or general partnership, corporation or other business entity which directly or indirectly controls the Sublessee, is controlled by, or is under common control with the Sublessee, or which directly or indirectly owns, controls, or holds power to vote ten percent (10%) or more of the outstanding voting securities of Sublessee, or which has in common one or more partners, officers, directors, trustees, branch managers, or other persons occupying similar status or performing similar functions), predecessors, or successors and Sublessor or any of its Affiliates, predecessors, or successors.
Any default by Sublessee of any of the Agreements listed in this Section 4 above shall, at the option of Sublessor be and constitute a default under this Sublease, such that the Agreements listed in this Section 4 above and this Sublease are cross-defaulted.
Source: Item 23 — RECEIPT (FDD pages 68–406)
What This Means (2025 FDD)
According to Churchs Chicken's 2025 Franchise Disclosure Document, the sublease agreement defines 'Affiliate' broadly in relation to the sublessee. Specifically, it encompasses any individual or business entity that directly or indirectly controls the sublessee, is controlled by the sublessee, or is under common control with the sublessee. This definition extends to entities owning or controlling 10% or more of the sublessee's voting securities, as well as those sharing common partners, officers, directors, trustees, branch managers, or individuals in similar roles.
This definition is important because the sublessee's compliance with all agreements, including the sublease, franchise agreement, and any related documents, extends to its affiliates. Any default by an affiliate under these agreements can be considered a default by the sublessee under the sublease, creating a cross-default provision. This means that if an affiliate breaches any of the specified agreements, Churchs Chicken has the option to treat it as a breach of the sublease, potentially leading to termination of the sublease agreement.
This broad definition of 'Affiliate' and the cross-default implications are significant for prospective franchisees. It means that the financial stability and compliance of any related business entities or individuals could directly impact the franchisee's standing with Churchs Chicken. Franchisees need to carefully consider the business practices and financial health of any entities that fall under this definition of 'Affiliate' to avoid potential defaults and ensure compliance with the sublease and related agreements.