What conditions must be reasonably acceptable to Checkers regarding the Operating Partner's right to own and control equity and voting rights?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
- 8.03 Operating Partner. If you are, or at any time become, a business corporation, partnership, limited liability company or other legal entity, you must designate in Exhibit A as the "Operating Partner" an individual we approve who must: (a) own and control, or have the right to own and control (subject to conditions reasonably acceptable to us) not less than ten percent (10%) of your equity and voting rights; (b) have the authority to make, and bind you and all your Owners to, all operational decisions regarding the Franchised Restaurant; and (c) complete our training program to our satisfaction before engaging in his or her operational duties. You may not change the Operating Partner without our prior written consent.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, if a franchisee is a business entity, they must designate an Operating Partner who meets specific criteria. One of these criteria is that the Operating Partner must own and control, or have the right to own and control, at least 10% of the franchisee's equity and voting rights. However, this right to own and control is "subject to conditions reasonably acceptable" to Checkers.
This means that while the Operating Partner needs to have a significant stake in the franchise entity, Checkers retains the right to set conditions on how that ownership and control are structured. These conditions are not explicitly detailed in this section, but they must be deemed reasonable by Checkers. This gives Checkers some leverage over the franchisee's business structure and ensures that the Operating Partner is someone they approve of and who is committed to the brand standards.
For a prospective franchisee, this implies that the ownership structure of their business entity and the role of the Operating Partner will be subject to Checkers's scrutiny. It is important to understand what conditions Checkers might impose on the Operating Partner's equity and voting rights before finalizing any business agreements. This could include restrictions on transferring ownership, requirements for the Operating Partner to be actively involved in the business, or other stipulations that Checkers deems necessary to protect its brand and system. Franchisees should discuss these conditions with Checkers during the due diligence process to ensure they are comfortable with the requirements.