What constitutes 'Competitive Activities' that are restricted after termination or expiration of an Hck Hot Chicken Area Development Agreement?
Hck_Hot_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in Area Development Agreement | Summary |
|---|---|---|
| from the sale of fried 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 5% or more of any class of securities of such entity. | ||
| r. Non-competition covenants after the franchise is terminated or expires | Section 8.2 | Except with our express written consent, no involvement in any Competitive Activities, as defined above, for 2years within the Development Area. |
Source: Item 17 — RENEWAL, TERMINATIONS, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 44–51)
What This Means (2025 FDD)
According to Hck Hot Chicken's 2025 Franchise Disclosure Document, 'Competitive Activities' are restricted for a period of 2 years within the Development Area after the Area Development Agreement is terminated or expires, unless Hck Hot Chicken provides express written consent.
Specifically, 'Competitive Activities' include owning, operating, lending to, advising, being employed by, or having any financial interest in (i) any restaurant that derives 20% or more of its gross sales from fried chicken (excluding Hck Hot Chicken restaurants operating under a valid franchise agreement), or (ii) any business specializing in developing, operating, or franchising restaurants that derive 20% or more of their gross sales from fried chicken, or (iii) any business engaged in the preparation, production, or sale, at wholesale, of any fried chicken food product.
However, the restrictions do not apply to the ownership of securities of any entity traded on a national securities exchange, provided that 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 securities of that entity. This exception allows franchisees to invest in publicly traded companies, even those involved in competitive activities, as long as the investment remains passive and below the specified ownership threshold.