Can Hck Hot Chicken withhold approval of a transfer by the franchisee, and if so, under what conditions?
Hck_Hot_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in Franchise Agreement | Summary |
|---|---|---|
| governmental agency indicating that you are no longer licensed to use our Marks. See also "r" below. | ||
| j. Assignment of | Section 13.1 | No restriction on our right to assign. |
| contract by Franchisor | ||
| k. "Transfer" by franchisee – defined | Section 13.2.1 | Includes any voluntary, involuntary, direct, or indirect assignment, sale, gift, exchange, grant of a security interest, or change of ownership in the Franchise Agreement, the Franchise, or interest in the Franchise. |
| l. Franchisor approval of | Section 13.2 | Transfers require our express written consent. |
| transfer by franchisee m. Conditions for franchisor approval of transfer | Sections 13.2 - 13.4 | New franchisee: must qualify; assume the Franchise Agreement or sign a new franchise agreement; complete training and pay our training fee; and refurbish the Restaurant. You must provide us with an estoppel agreement and a list of all persons having an interest in the Franchise Agreement or in the franchisee; pay all amounts then due to us; sign a general release; sign a non-compete agreement not to engage in a competitive business for one year within: (i) a 25-mile radius of your HCK Hot Chicken Restaurant (and including the premises of the Restaurant); and (ii) a 25-mile radius of all other HCK Hot Chicken Restaurants that are operating or under construction; provide us with all documents relating to the transfer; disclose to us all material information that we request regarding the transferee; the purchase price and the terms of the transfer; must not be in default of the Franchise Agreement; and pay a transfer fee and reimburse our broker fees (See also "r" below). If the Franchise Agreement was signed pursuant to an Area Development Agreement and you operate three or fewer Restaurants, all Franchise Agreements operated under the Area Development Agreement must be assigned to the same assignee. If the Franchise Agreement was signed pursuant to an Area Development Agreement and you operate four or more Restaurants, at least half of the Restaurants operated under the Area Development Agreement must be assigned to the same assignee. With our written consent, you may transfer a Franchise Agreement to an entity of which you directly own 100% interest for convenience of ownership. 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, the transfer of a franchise requires the franchisor's express written consent. Hck Hot Chicken has laid out several conditions that must be met for a transfer to be approved.
The new franchisee must qualify under Hck Hot Chicken's standards, assume the existing Franchise Agreement or sign a new one, complete the required training and pay the associated training fee, and refurbish the restaurant to meet current standards. The franchisee looking to transfer must provide Hck Hot Chicken with an estoppel agreement and a list of all parties with interest in the Franchise Agreement or the franchisee entity.
Additionally, the transferring franchisee must pay all outstanding amounts owed to Hck Hot Chicken, sign a general release, and agree to a non-compete clause. This clause restricts involvement in any competitive business for one year within a 25-mile radius of the Hck Hot Chicken restaurant being transferred and all other Hck Hot Chicken restaurants operating or under construction. The franchisee must also provide all documents related to the transfer, disclose all material information about the transferee requested by Hck Hot Chicken, and provide details on the purchase price and terms of the transfer. The franchisee must not be in default of the Franchise Agreement and must pay a transfer fee and reimburse Hck Hot Chicken's broker fees.
If the Franchise Agreement was signed under an Area Development Agreement, specific rules apply depending on the number of restaurants operated. For three or fewer restaurants, all Franchise Agreements must be assigned to the same assignee. For four or more restaurants, at least half must be assigned to the same assignee. Hck Hot Chicken may consent to a transfer to an entity wholly owned by the franchisee for ownership convenience. If the new franchisee is a business entity, all holders of a 10% or greater interest must sign a Continuing Guaranty. The franchisee must reimburse Hck Hot Chicken for all costs associated with the transfer, including attorney's fees. Before offering shares of the franchisee entity through a private offering, the franchisee must provide copies of all offering materials, indemnify Hck Hot Chicken and related parties, and pay a non-refundable fee equal to 50% of the then-current Initial Franchise Fee, or a greater amount if needed to cover Hck Hot Chicken's costs.