What are the requirements if the new Hck Hot Chicken franchisee is a business entity?
Hck_Hot_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
If the new franchisee is a business entity, all holders of a 10% or greater interest in the new franchisee must sign a Continuing Guaranty. You must reimburse us for all costs and expenses that we incur in connection with such a transfer, including attorneys' fees. Before shares of a Franchisee which is a business entity may be offered by private offering, you must provide us with copies of all offering materials; indemnify us, our officers, directors, shareholders, partners, agents, representatives, independent contractors, and employees of each in connection with the offering; and pay us a non- refundable fee of 50% of our then current Initial Franchise Fee or a greater amount, if necessary, to reimburse us for our costs and expenses associated with reviewing the proposed offering.
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, if a new franchisee is a business entity, all individuals holding a 10% or greater interest in that entity must sign a Continuing Guaranty. This means that these individuals personally guarantee the obligations of the business entity under the Franchise Agreement. This is a common practice in franchising, as it ensures that individuals with significant ownership stakes are personally liable for the franchise's performance.
In addition to the Continuing Guaranty, the transferring franchisee must also reimburse Hck Hot Chicken for all costs and expenses incurred in connection with the transfer, including attorney's fees. This is also a standard practice, as the franchisor incurs costs in reviewing and approving the transfer.
Furthermore, before shares of a franchisee that is a business entity can be offered through a private offering, the franchisee must provide Hck Hot Chicken with copies of all offering materials. They must also indemnify Hck Hot Chicken and its related parties in connection with the offering. Finally, the franchisee must pay Hck Hot Chicken a non-refundable fee equal to 50% of the then-current Initial Franchise Fee, or a greater amount if necessary to cover Hck Hot Chicken's costs and expenses in reviewing the proposed offering. This requirement is likely in place to protect Hck Hot Chicken's brand and reputation by ensuring that any potential investors are properly vetted and that the offering is conducted in compliance with applicable laws and regulations.