What is the definition of a 'Competitive Business' in the Checkers franchise agreement?

According to Checkers' 2025 Franchise Disclosure Document, a "Competitive Business" is defined within the franchise agreement. This definition is crucial because it restricts franchisees (and related parties) from engaging in businesses that could directly compete with the Checkers system, brand, and market share. Understanding this definition is vital for prospective franchisees to avoid potential conflicts of interest and ensure compliance with the franchise agreement.

Specifically, a "Competitive Business" is defined as 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 subparagraph (i) (other than a "Checkers" or "Rally's"-branded restaurant operated under a franchise agreement with Checkers). This means that if a franchisee or their affiliate owns or operates a restaurant that heavily relies on the sale of these specific items in a similar format, it would be considered a competitive business.

However, the agreement provides a limited exception: owning less than five percent (5%) of a publicly traded Competitive Business for investment purposes is permitted, provided that neither the franchisee nor an individual controls the company. This exception allows for minor investment without triggering a conflict of interest. This clause aims to protect Checkers' market position and prevent franchisees from diverting resources or knowledge to competing ventures. Franchisees should carefully consider this definition and any potential business interests they or their affiliates may have to ensure they do not violate the terms of the franchise agreement.

In practical terms, this means a Checkers franchisee cannot operate (or have a significant financial interest in) another fast-food restaurant that heavily features hamburgers, cheeseburgers, and hot dogs. This restriction extends to businesses that franchise similar concepts. The definition is designed to prevent franchisees from directly competing with the Checkers brand and leveraging confidential information or resources gained from the franchise to benefit a competing business. This non-compete clause is a standard element in franchise agreements to protect the franchisor's brand and market share.