Does the Checkers FDD mention anything about ownership related to the contract?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
res we prescribe at any time and from time to time to prevent unauthorized use or disclosure of the Confidential Information, including requiring any of your personnel who attends training or who has the ability to access our Confidential Information, to sign nondisclosure agreements in a form we prescribe or approve and delivering those agreements to us.
- 7.02 In-Term Covenants. You acknowledge that we have granted you the franchise in consideration of, and reliance upon, your agreement to deal exclusively with us. You therefore agree that, during the Term and any successor franchise term, neither you, any of your Owners, nor any of your or your Owners' Immediate Family will (without our prior consent, which consent we may condition or withhold for any or no reason):
- (a) have any direct or indirect controlling or non-controlling ownership interest as an owner whether of record, beneficially, or otherwise in a Competitive Business, wherever located or operating (except that equity ownership of less than five percent (5%) of a Competitive Business whose stock or other forms of ownership interest are publicly traded on a recognized United States stock exchange will not be deemed to violate this subparagraph);
- (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 Restaurant to a Competitive Business;
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the franchise agreement addresses ownership interests, particularly concerning competitive businesses. It stipulates that during the term of the franchise, franchisees, their owners, and their immediate family members are restricted from holding direct or indirect ownership interests in competitive businesses without prior consent from Checkers. An exception exists for equity ownership of less than 5% in a publicly traded competitive business, provided that neither the individual nor the franchisee controls the company.
This clause aims to protect Checkers' market position and prevent conflicts of interest. By limiting franchisees' involvement in competing businesses, Checkers seeks to ensure that franchisees remain fully committed to the success of their Checkers franchise. The FDD also states that franchisees must identify themselves as the owners of their franchised restaurant in all dealings with customers, lessors, and other parties. This reinforces the franchisee's independent ownership and operational responsibility.
These restrictions are typical in franchise agreements to maintain brand consistency and prevent franchisees from diverting resources or knowledge to competing ventures. Prospective franchisees should carefully consider these limitations and ensure they do not have existing ownership interests that would conflict with the franchise agreement. It is also important to understand the definition of a "Competitive Business" as defined in the FDD, to avoid unintentional violations of the agreement.
Furthermore, the agreement specifies that Checkers retains rights to engage in business activities, including acquiring ownership interests in other businesses, even those similar to Checkers. This allows Checkers to expand and evolve its business model without being restricted by individual franchise agreements, as long as they do not violate the franchisee's protected area. Franchisees acknowledge that their rights are non-exclusive, and they waive claims related to Checkers' business activities.