What is the consequence if a Checkers franchisee (or their Operating Partner) engages in other business activities that conflict with their obligations?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
If I fail or refuse to abide by any of my foregoing obligations or promises made under this Agreement, and Franchisor or Franchisee obtains enforcement in a judicial or arbitration proceeding, then my obligations and responsibilities specified under the breached covenant will be tolled during the period(s) of time that the covenant is breached and/or Franchisor or Franchisee seeks to enforce it, and will continue for two (2) years starting from the effective date of the order enforcing the covenant.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, if a franchisee or their Operating Partner fails to abide by their obligations and the franchisor or franchisee seeks enforcement in a legal proceeding, the obligations and responsibilities will be tolled during the period of the breach and enforcement efforts. These obligations will then continue for two years from the date of the enforcement order.
This means that if a Checkers franchisee violates their agreement by engaging in competitive business activities, Checkers can take legal action. If Checkers wins the case, the franchisee's restrictions on competitive activities will be extended for an additional two years beyond the original term. This aims to prevent franchisees from undermining the Checkers system by using confidential information or competing directly with the brand, even after their initial franchise term ends.
This clause is designed to protect Checkers' interests by ensuring that franchisees remain committed to the brand and do not use their knowledge or resources to benefit competitors. It also serves as a deterrent against engaging in conflicting business activities, as the consequences can significantly prolong the period during which the franchisee is restricted from such activities. The franchisee also acknowledges that they possess skills and abilities of a general nature, and the opportunity for exploiting such skills in other ways than the operation or involvement in the activities of a Restaurant or a Competitive Business, so that enforcement of covenants made in this Agreement will not deprive them of their personal goodwill or ability to earn a living after the effective date of expiration or termination of their relationship with Franchisee, the Franchised Restaurant, or Restaurants generally.