Does the Checkers franchise agreement state that the franchisee acknowledges the proximate cause of damages sustained by the franchisor is the franchisee's act of 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, the franchise agreement stipulates that if a franchisee defaults, leading to the termination of the agreement, the franchisee is liable for damages incurred by Checkers. Specifically, the franchisee acknowledges that their act of default is the direct cause of these damages, not Checkers' decision to terminate the agreement. This includes all actual, consequential, special, and incidental damages, regardless of foreseeability.
This clause has significant implications for prospective Checkers franchisees. It means that if a franchisee breaches the agreement, resulting in termination, they could be responsible for a broad range of damages suffered by Checkers. These damages are not limited to easily predictable losses but can extend to indirect and unusual losses as well.
Such a provision is not uncommon in franchise agreements, as franchisors seek to protect their brand and business interests. However, the scope of potential damages—including 'consequential, special, and incidental'—places a considerable financial risk on the franchisee. A prospective franchisee should carefully evaluate their ability to comply with all terms of the franchise agreement and consider the potential financial exposure in case of default.
It is advisable for potential Checkers franchisees to seek legal counsel to fully understand the implications of this clause and to assess the risks associated with it. Understanding the full extent of potential liabilities can help franchisees make informed decisions and manage their business effectively to avoid default.