Does the Checkers franchise agreement specify that the franchisee must pay all special damages if the agreement is terminated due to the franchisee's default?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
18.03 Exercise of Rights. The rights of Franchisor and Franchisee hereunder are cumulative and no exercise or enforcement by Franchisor or Franchisee of any right or remedy hereunder shall preclude the exercise or enforcement by Franchisor or Franchisee of any other right or remedy hereunder which Franchisor or Franchisee is entitled to enforce by law. 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. Notwithstanding the foregoing, and except as otherwise prohibited or limited by applicable law, any failure, neglect, or delay of a party to assert any breach or violation of any legal or equitable right
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, if a franchisee defaults on the franchise agreement and Checkers terminates the agreement, the franchisee is responsible for paying Checkers all actual, consequential, special, and incidental damages that Checkers incurs due to the early termination. This obligation applies regardless of whether these damages were reasonably foreseeable at the time of the agreement. The agreement specifies that the franchisee's act of default is the direct cause of these damages, not Checkers' decision to terminate the agreement.
This clause means that a Checkers franchisee could face significant financial liabilities beyond typical losses if they breach the agreement. These damages can include lost future profits, costs associated with finding a new franchisee, and damage to the brand's reputation. The franchisee's responsibility extends to covering all these costs, even if they were not predictable when the agreement was signed.
In addition to the above damages, Checkers can also 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 open for 24 months, the calculation is based on the number of months the restaurant has been in operation. These Early Termination Damages are considered liquidated damages and are not considered a penalty.
Checkers retains the option to pursue Early Termination Damages or other available remedies, including actual damages, in the event of a breach by the franchisee. These remedies are cumulative and non-exclusive, meaning Checkers can pursue multiple avenues for compensation. This could create a substantial financial risk for franchisees who fail to meet their obligations under the franchise agreement.