Does the Checkers franchise agreement state that the proximate cause of damages sustained by the franchisor is the franchisee's act of 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.
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 and Checkers terminates the agreement, the franchisee is liable for damages. The agreement explicitly states that the proximate cause of these damages is the franchisee's act of default. This means that Checkers attributes the financial harm resulting from early termination directly to the franchisee's failure to uphold their contractual obligations.
This clause has significant implications for prospective Checkers franchisees. It means that if a franchisee breaches the franchise agreement, leading to termination, they could be responsible for covering Checkers' actual, consequential, special, and incidental damages, regardless of foreseeability. This could include lost future royalties, costs associated with finding a new franchisee, and other related expenses.
Franchisees should carefully consider the potential financial risks associated with defaulting on the franchise agreement. It is advisable to fully understand the terms of the agreement, maintain open communication with Checkers, and seek legal counsel to mitigate the risk of default and potential liability for substantial damages.