Following termination or expiration of the Checkers agreement, what are the geographic limitations on non-competition covenants?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
| PROVISION | SECTION IN FRANCHISE OR OTHER AGREEMENT | SUMMARY | |
|---|---|---|---|
| r. | Non-competition covenants after the agreement is terminated or expires | Section 9.02 | No competing business for 2 years within your Development Area or within 3 miles of any other Checkers Restaurant or Rally's Restaurant. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION THE FRANCHISE RELATIONSHIP (FDD pages 66–71)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, if the franchise agreement is terminated or expires, the franchisee is subject to certain non-competition covenants. Specifically, the franchisee cannot engage in any competing business for a period of 2 years. This restriction applies within the franchisee's Development Area or within 3 miles of any other Checkers or Rally's Restaurant.
This means that after leaving the Checkers system, a former franchisee is restricted from opening or working for a competing business within a defined geographic area. The non-compete aims to protect Checkers' market share and brand recognition by preventing former franchisees from using their knowledge of the Checkers system to benefit a competitor. The restriction applies regardless of whether the franchise agreement was terminated by Checkers or whether it simply expired at the end of its term.
The geographic scope of the non-compete is defined by two factors: the franchisee's Development Area and a 3-mile radius around any Checkers or Rally's Restaurant. The Development Area is specific to each franchisee and outlined in their franchise agreement. The 3-mile radius is a more general restriction that applies regardless of the franchisee's specific territory. This dual restriction ensures that Checkers is protected both within a franchisee's exclusive territory and in the broader market where Checkers and Rally's restaurants operate.
Prospective franchisees should carefully consider these non-competition terms, as they could significantly limit their business opportunities after leaving the Checkers system. It is important to understand the exact boundaries of the Development Area and to assess the potential impact of the 3-mile radius restriction. Franchisees should seek legal counsel to fully understand the implications of these covenants and to negotiate terms that are reasonable and appropriate for their individual circumstances.