What are some examples of situations that would allow Hck Hot Chicken to exercise its Step-In Rights?
Hck_Hot_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
- 14.6 Assumption of Management; Step-In Rights.
In order to prevent any interruption of operations which would cause harm to the Franchised Restaurant, thereby depreciating the value thereof, Franchisor has the right, but not the obligation, to step-in and designate an individual or individuals of its choosing ("Interim Manager") for so long as Franchisor deems necessary and practical to temporarily manage the Franchised Restaurant: (i) if Franchisee fails to comply with any System standard or provision of this Franchise Agreement and does not cure the failure within the time period specified by the Franchise Agreement or by Franchisor; (ii) if Franchisor determines in its sole judgment that the operation of the Franchised Restaurant is in jeopardy; (iii) if Franchisor determines in its sole discretion that operational problems require that Franchisor operate the Franchised Restaurant; (iv) if Franchisee abandons or fails to actively operate the Franchised Restaurant; (v) upon Franchisee's (or Franchisee's Operating Principal, if an entity) absence, termination, illness, death, incapacity or disability; or (vi) if Franchisor deems Franchisee (or Franchisee's Operating Principal, if any entity) incapable of operating the Franchised Restaurant ("Step-in Rights").
If Franchisor exercises the Step-In Rights:
(a) Franchisee agrees to pay Franchisor, in addition to all other amounts due under this Franchise Agreement, the Interim Manager's compensation and any direct out-of-pocket costs and expenses in connection with the exercise of such Step-In Rights;
(b) all monies from the operation of the Franchised Restaurant during such period of operation by Franchisor shall be kept in a separate account, and the expenses of the Franchised Restaurant, including Franchisor's costs and expenses and the compensation and direct out-of-pocket costs and expenses for the Interim Manager, shall be charged to said account;
(c) Franchisee acknowledges that the Interim Manager will have a duty to utilize only reasonable efforts and will not be liable to Franchisee or its owners for any debts, losses, or obligations the Franchised Restaurant
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 54)
What This Means (2025 FDD)
According to Hck Hot Chicken's 2025 Franchise Disclosure Document, Hck Hot Chicken has the right to step in and temporarily manage a franchised restaurant under certain conditions to prevent operational interruptions that could harm the restaurant's value.
These Step-In Rights can be exercised if the franchisee fails to comply with any System standard or provision of the Franchise Agreement and does not correct the failure within the specified time, if Hck Hot Chicken determines that the restaurant's operation is in jeopardy, or if operational problems require Hck Hot Chicken to operate the restaurant. Additional conditions include if the franchisee abandons or fails to actively operate the restaurant, upon the franchisee's absence, termination, illness, death, incapacity, or disability, or if Hck Hot Chicken deems the franchisee incapable of operating the restaurant.
If Hck Hot Chicken exercises these Step-In Rights, the franchisee is responsible for paying the Interim Manager's compensation and any direct out-of-pocket costs. All monies from the restaurant's operation during this period will be kept in a separate account, and the restaurant's expenses, including Hck Hot Chicken's costs and the Interim Manager's compensation, will be charged to this account. The Interim Manager is only required to utilize reasonable efforts and will not be liable to the franchisee for any debts, losses, or obligations of the restaurant.