Is the covenant not to compete in the Checkers Franchise Agreement and Development Agreement that extends beyond termination always enforceable under California law?

According to the 2025 Checkers FDD, the enforceability of the covenant not to compete, which extends beyond the termination of the franchise agreement or development agreement, is not guaranteed under California law. Specifically, Item 23 of the FDD includes an addendum for California which states that such provisions "may not be enforceable under California law." This means that if a Checkers franchisee in California leaves the system, the enforceability of the non-compete clause will be determined by California law, which may or may not uphold the restrictions.

This has significant implications for prospective Checkers franchisees in California. Non-compete agreements are meant to protect the franchisor's business interests by preventing former franchisees from using proprietary information or competing unfairly within a certain area and time frame. However, California law tends to disfavor such restrictive covenants, especially those that prevent individuals from pursuing their livelihood. Therefore, a Checkers franchisee in California might find it easier to start a competing business after leaving the Checkers system compared to franchisees in other states with more lenient non-compete laws.

It is important for potential Checkers franchisees in California to seek legal counsel to fully understand the implications of the non-compete clause in their specific circumstances. They should be aware that the enforceability of this provision is not assured and depends on various factors, including the specific wording of the agreement, the nature of the business, and the geographic scope and duration of the restriction. Consulting with an attorney can help a franchisee assess the potential risks and benefits associated with this clause and make informed decisions about entering into the franchise agreement.