In the Checkers Development Agreement, what representations do franchisees make regarding competitive businesses?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
1.03 Your Representations. You and your Owners, if applicable, represent and warrant to us that: (a) neither you nor any of your Owners have made any untrue statement of any material fact or have omitted to state any material fact in obtaining the rights granted hereunder; (b) neither you nor any of your Owners have any direct or indirect legal or beneficial interest in any business that may be deemed a Competitive Business, except as otherwise fully and accurately disclosed in your franchise application submitted to us; and (c) the execution and performance of this Agreement will not violate any other agreement to which you or any of your Owners may be bound. You recognize that we have approved your franchise application in reliance on all of the statements you and your Owners have made in connection therewith.
(b) perform services as a director, officer, manager, employee, consultant, representative, or agent for a Competitive Business, wherever located or operating;
(c) divert or attempt to divert any actual or potential business or customer of any Checkers or Rally's-branded restaurant to a Competitive Business; or
(d) engage in any other activity which, in our sole opinion, might be injurious or prejudicial to the goodwill associated with the Marks or the System.
6.03 Procurement of Additional Covenants.
You agree to require and obtain the execution of a non-disclosure and non-competition agreement, as we may require at our sole discretion, from all of the following persons:
(a) Before employment or any promotion, your Operating Partner; and,
(b) If you are a business entity, all Owners with at least a ten percent (10%) direct or indirect legal or beneficial ownership interest in you; all of your officers, directors and managers; and, all persons possessing equivalent positions in any business entity which directly or indirectly owns and/or controls you.
You shall procure all such Nondisclosure and Non-Competition Agreements no later than ten (10) days following the Effective Date (or, if any individual or entity attains any status identified above after the Effective Date, within ten (10) days after such individual or entity's attains such status) and shall furnish to us copies of all executed Nondisclosure and Non-Competition Agreements within ten (10) days following their execution.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, franchisees make several representations regarding competitive businesses. Franchisees and their owners represent and warrant that they have not made any untrue statement of material fact or omitted any material fact when obtaining rights and that they do not have any direct or indirect legal or beneficial interest in any business that may be deemed a Competitive Business, unless fully and accurately disclosed in their franchise application. They also represent that the execution and performance of the Development Agreement will not violate any other agreement they or their owners are bound by. Checkers states that they approved the franchise application in reliance on all statements made in connection with it.
These representations are crucial because they ensure that franchisees are transparent about any potential conflicts of interest. By disclosing any involvement in competitive businesses, Checkers can assess whether the franchisee's other ventures might negatively impact their commitment to the Checkers franchise or create an unfair competitive advantage. This protects the Checkers brand and the interests of other franchisees within the system.
Furthermore, the Development Agreement prohibits franchisees from engaging in activities that could harm the Checkers brand. This includes performing services for a Competitive Business, diverting business from Checkers or Rally's restaurants to a Competitive Business, or engaging in any activity that might be injurious or prejudicial to the goodwill associated with the Marks or the System. Franchisees must also obtain non-disclosure and non-competition agreements from their Operating Partner and, if the franchisee is a business entity, from all Owners with at least a ten percent (10%) direct or indirect legal or beneficial ownership interest, officers, directors, and managers. These agreements must be procured within ten (10) days of the Effective Date or when an individual attains a relevant status, with copies furnished to Checkers within ten (10) days of execution. This requirement extends the non-compete obligations beyond just the franchisee to key individuals involved in the operation, ensuring a broader commitment to avoiding conflicts of interest and protecting Checkers' business interests.