Are there any exceptions to the post-term non-competition covenant for Churchs Chicken developers?
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, there are specific exceptions to the post-term non-competition covenants for developers. The standard post-term non-competition covenant includes 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 existing Churchs Chicken restaurant. However, this restriction does not apply to a developer's existing restaurants, if any, or to other restaurants they operate that are franchised by Churchs Chicken or its affiliates. This means a developer can continue operating existing restaurants, even if they sell fried chicken, and can also operate other franchised restaurants under the Churchs Chicken umbrella or its affiliates without violating the non-compete agreement.
This exception provides some flexibility for Churchs Chicken developers who may already have restaurant businesses or who wish to diversify their franchise portfolio within the Churchs Chicken system. It allows them to continue operating these businesses without being penalized by the non-competition covenant. However, it's important to note that the restriction still applies to owning a competing fried chicken restaurant within the Development Area or a 5-mile radius of an existing Churchs Chicken location, ensuring that developers do not directly compete with the franchise after the agreement is terminated or expires.
It is also important to note that these non-competition covenants also apply to individual owners, as stated in § 4 of the Guaranty Agreement. Therefore, individual owners are also subject to the same restrictions and exceptions. Any modifications to the Development Agreement, including the non-competition covenants, must be mutually agreed upon and in writing, although Churchs Chicken retains the right to modify the Manual. Prospective franchisees should carefully review the Development Agreement and Guaranty Agreement to fully understand the terms and conditions of the non-competition covenants and their exceptions.