What other business activities are prohibited for a Checkers franchisee (or their Operating Partner)?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
I further agree that, during the term of my employment/service/association or ownership participation, I will not, directly or indirectly, engage or participate in any Competitive Business (defined below in this paragraph), any of which such prohibited behavior I understand and hereby explicitly acknowledge would or could be injurious to, or (in Franchisor's sole judgment) have an adverse effect upon, Franchisor's protectable interests in the Confidential Information, the "Checkers" trademark, or the goodwill and/or reputation of Restaurants generally. I agree that I am prohibited from engaging in any Competitive Business as a proprietor, partner, investor, shareholder, director, officer, employee, principal, agent, advisor, or consultant. For purposes of this Agreement, a "Competitive Business" means any business that: (i) operates as a restaurant or similar food-service provider and derives more than twenty percent (20%) of its revenue from selling hamburgers, cheeseburgers and hot dogs in a fast-food, quick-service, drive-thru or drive-in format; or (ii) grants franchises or licenses to others to operate the type of business specified in the preceding subparagraph (i) (other than a "Checkers" or "Rally's"branded restaurant operated under a franchise agreement with Franchisor). Despite the foregoing definition of a Competitive Business, nothing under this Agreement or the Franchise Agreement will prevent Individual from owning for investment purposes less than five percent (5%) of a Competitive Business whose stock or other forms of ownership interest are publicly traded on a recognized United States stock exchange, and so long as neither Individual nor Franchisee controls the company in question.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, franchisees and their Operating Partners face restrictions on engaging in competitive business activities during their association with the franchise. A "Competitive Business" is defined as any business that operates as a restaurant or food-service provider deriving more than 20% of its revenue from selling hamburgers, cheeseburgers, and hot dogs in a fast-food, quick-service, drive-thru, or drive-in format. This definition also extends to businesses that grant franchises or licenses to others to operate similar businesses, excluding other Checkers or Rally's franchises.
This restriction means that a Checkers franchisee or their Operating Partner cannot be involved in owning, operating, or investing in a competing fast-food restaurant that heavily relies on hamburger, cheeseburger, and hot dog sales. This prohibition extends to roles such as proprietor, partner, investor, shareholder, director, officer, employee, principal, agent, advisor, or consultant in such a competitive business. The FDD specifies that this is to protect Checkers' confidential information, trademarks, and the goodwill and reputation of its restaurants.
However, there is an exception: an individual can own less than 5% of a publicly traded Competitive Business for investment purposes, provided that neither the individual nor the franchisee controls the company. This exception allows for minor investment in competing businesses without violating the agreement, as long as it remains passive and doesn't involve control over the competitor. This clause aims to prevent franchisees and their Operating Partners from directly competing with Checkers while still allowing for minor investment opportunities in the broader market.
These restrictions remain in effect during the term of employment, service, association, or ownership participation with Checkers. This non-compete provision is designed to protect Checkers' market position and proprietary information by preventing franchisees and their Operating Partners from using their knowledge and resources to benefit competing businesses. Prospective franchisees should carefully consider these limitations and how they might affect their other business interests or opportunities.