Does the Checkers franchise agreement specify that the franchisee must pay all actual damages if the agreement is terminated due to the franchisee's default?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee commits any act of default under this Agreement for which Franchisor exercises its right to terminate this Agreement, Franchisee shall pay to Franchisor all actual, consequential, special and incidental damages Franchisor incurs as a result of the premature termination of this Agreement regardless of whether or not such damages are reasonably foreseeable. Franchisee acknowledges and agrees that the proximate cause of such damages sustained by Franchisor is Franchisee's act of default and not Franchisor's exercise of its right to terminate.
If we terminate this Agreement as a result of your breach, you and we agree that the amount of damages which we would incur for any such early termination would be difficult, if not impossible, to accurately ascertain. Accordingly, within 30 days following such termination, you shall pay us an amount equal to the average monthly royalty fees and advertising contributions that you owed to us for the past 24 months multiplied by the number of months remaining in the Term ("Early Termination Damages"). If you have not operated the Franchised Restaurant for 24 months prior to the termination of this Agreement, the Early Termination Damages will be calculated by using the average monthly royalties and advertising contributions you owed for the number of months that the Franchised Restaurant operated multiplied by the number of months remaining in the Term. These Early Termination Damages shall constitute liquidated damages and are not to be construed as a penalty and shall be the joint and several liability of you and each of your Owners who personally guarantees your obligations under this Agreement.
The imposition of Early Termination Damages shall be at our sole option. We are not required to impose Early Termination Damages and may, in addition or in lieu thereof, pursue other remedies available to us under the terms and conditions of this Agreement, in equity or at law in the event of your breach under this Agreement, including, without limitation, actual damages we incur, if such can be ascertained. All such remedies shall be cumulative and non-exclusive
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, if the franchisee commits an act of default that leads to the termination of the franchise agreement, the franchisee is responsible for paying Checkers all actual, consequential, special, and incidental damages incurred as a result of the early termination. This obligation applies regardless of whether these damages were reasonably foreseeable. The agreement specifies that the franchisee's act of default is the direct cause of these damages, not Checkers's decision to terminate the agreement.
In addition to actual damages, Checkers has the option to impose Early Termination Damages. These damages are calculated based on the average monthly royalty fees and advertising contributions owed by the franchisee over the past 24 months, multiplied by the number of months remaining in the franchise term. If the restaurant has not been in operation for 24 months, the calculation is based on the number of months it has been operating. These Early Termination Damages are considered liquidated damages and are the joint and several liability of the franchisee and any owners who personally guarantee the franchisee's obligations.
Checkers retains the sole option to impose Early Termination Damages and is not obligated to do so. The franchise agreement states that Checkers may pursue other available remedies, including actual damages if they can be determined, in addition to or instead of Early Termination Damages. All remedies available to Checkers are cumulative and non-exclusive, meaning Checkers can pursue multiple avenues of compensation if a franchisee defaults.