What activities are considered 'Competitive Activities' that are prohibited for a Restricted Person or Restaurant Manager of Hck Hot Chicken during the term of the agreement?
Hck_Hot_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
"Competitive Activities" means to, own, operate, lend to, advise, be employed by, or have any financial interest in (i) any restaurant that derives twenty percent (20%) or more of its Gross Sales from the sale of fried chicken, other than a Restaurant operated pursuant to a validly subsisting Franchise Agreement with Franchisor, or (ii) any business that specializes in developing, operating or franchising restaurants that derives twenty percent (20%) or more of its Gross Sales from the sale of chicken, or (iii) any business engaged in the preparation, production or sale, at wholesale, of any fried chicken food product. Notwithstanding the foregoing, "Competitive Activities" shall not include the direct or indirect ownership solely as an investment, of securities of any Entity which are traded on any national securities exchange if the owner thereof (i) is not a controlling
person of, or a member of a group which controls, such Entity and (ii) does not, directly or indirectly, own five percent (5%) or more of any class of securities of such Entity.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 54)
What This Means (2025 FDD)
According to Hck Hot Chicken's 2025 Franchise Disclosure Document, 'Competitive Activities' are specifically defined in relation to owning, operating, or being involved with businesses that focus on fried chicken. A Restricted Person or Restaurant Manager is prohibited from owning, operating, lending to, advising, being employed by, or having any financial interest in certain businesses.
These prohibited activities include involvement with any restaurant that derives 20% or more of its gross sales from fried chicken, excluding Hck Hot Chicken franchises. It also extends to businesses specializing in developing, operating, or franchising restaurants that similarly derive 20% or more of their gross sales from chicken. Furthermore, it encompasses any business engaged in the wholesale preparation, production, or sale of fried chicken food products.
However, there is an exception: holding securities in a publicly traded entity is not considered a 'Competitive Activity' if the owner is not a controlling person or part of a controlling group, and does not directly or indirectly own 5% or more of any class of the entity's securities. This exception allows for passive investments in larger companies without violating the competitive restrictions.