Can the Checkers agreement be terminated if the franchisee breaches another agreement with Checkers or its affiliates?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
f the Development Rights;
- (c) if you or any of your Owners or Affiliates make any material misstatement or omission in the application for the development rights conferred by this Agreement or in any other information provided to us, or are convicted of, or plead no contest to, a felony or other crime or offense that we reasonably believe may adversely affect the goodwill associated with the Marks;
- (d) if you or any of your Owners or Affiliates make any unauthorized use or disclosure of the Confidential Information;
- (e) if you or any of your Owners or Affiliates fail to comply with any other provision of this Agreement and do not correct such failure within 30 days after written notice of such failure to comply is delivered to you;
- (f) if you or any of your Owners or Affiliates are in breach of any Franchise Agreement or other agreement with us or our Affiliates such that we or our Affiliates have the right to terminate the Franchise Agreement or such other agreement, whether or not we or they elect to exercise such right of termination; or
- (g) if we determine that any applicable federal or state legislation, regulation or rule, which is enacted, promulgated or amended after the Effective Date, may have an adverse effect on our rights, remedies or discretion in franchising Restaurants.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, a breach of another agreement with Checkers or its affiliates can lead to the termination of the franchise agreement. Specifically, if a franchisee, their owners, or affiliates are in breach of any Franchise Agreement or other agreement with Checkers or its affiliates, Checkers or its affiliates have the right to terminate the Franchise Agreement or other agreement, regardless of whether they choose to exercise that right. This is further reinforced by the cross-default clause.
The cross-default provision in the Checkers franchise agreement means that any default or breach by the franchisee (or their owners) or their affiliate (or their owner's affiliates) of any other agreement with Checkers or its affiliate will be considered an event of default under the franchise agreement. Conversely, any default or breach by the franchisee (or their owners) of the franchise agreement will be considered an event of default or breach by them under any and all agreements between Checkers or its affiliate and the franchisee (or any of their owners) or their affiliate (or any of their owner's affiliates).
This clause gives Checkers a broad right to terminate the franchise agreement if the franchisee or related parties fail to meet their obligations under any agreement with Checkers or its affiliates. It also allows Checkers or its affiliate to terminate all other agreements between them and the franchisee (or related parties) if the franchisee defaults under the franchise agreement, provided the nature of the default would have been considered an event of default under the franchise agreement. This creates a significant risk for franchisees, as a relatively minor breach of a separate agreement could trigger the termination of their Checkers franchise.
Prospective franchisees should carefully review all agreements they have or may enter into with Checkers or its affiliates to understand the potential consequences of a breach. It would be prudent to seek legal counsel to fully understand the implications of the cross-default clause and to assess the risk it poses to their investment. Franchisees should also ensure they have systems in place to monitor compliance with all agreements to avoid triggering a default.