During the Checkers franchise term, can a franchisee have an ownership interest in a Competitive Business?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
"Competitive Business" – Any business that: (i) operates as a restaurant or similar food-service provider and derives more than twenty percent (20%) of its revenue from selling hamburgers, cheeseburgers and hot dogs in a fast-food, quick-service, drive-thru or drive-in format; or (ii) grants franchises or licenses to others to operate the type of business specified in subparagraph (i) (other than a "Checkers" or "Rally's"-branded restaurant operated under a franchise agreement with us).
- 6.03 Procurement of Additional Covenants.
You agree to require and obtain the execution of a non-disclosure and non-competition agreement, as we may require at our sole discretion, from all of the following persons:
(a) Before employment or any promotion, your Operating Partner; and,
(b) If you are a business entity, all Owners with at least a ten percent (10%) direct or indirect legal or beneficial ownership interest in you; all of your officers, directors and managers; and, all persons possessing equivalent positions in any business entity which directly or indirectly owns and/or controls you.
You shall procure all such Nondisclosure and
- 1.03 Your Representations. You and your Owners, if applicable, represent and warrant to us that: (a) neither you nor any of your Owners have made any untrue statement of any material fact or have omitted to state any material fact in obtaining the rights granted hereunder; (b) neither you nor any of your Owners have any direct or indirect legal or beneficial interest in any business that may be deemed a Competitive Business, except as otherwise fully and accurately disclosed in your franchise application submitted to us; and (c) the execution and performance of this Agreement will not violate any other agreement to which you or any of your Owners may be bound. You recognize that we have approved your franchise application in reliance on all of the statements you and your Owners have made in connection therewith.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, franchisees and their owners are restricted from having interests in Competitive Businesses, with some exceptions. Specifically, before signing the franchise agreement, prospective Checkers franchisees and their owners must disclose any existing direct or indirect legal or beneficial interest in any business that might be considered a Competitive Business. This disclosure is part of the franchise application process, and Checkers relies on the accuracy of these statements when approving the application.
During the franchise term, franchisees must also ensure that their Operating Partner, and if the franchisee is a business entity, all Owners with at least a ten percent (10%) direct or indirect legal or beneficial ownership interest, along with officers, directors, and managers, execute a non-disclosure and non-competition agreement. These agreements must be obtained within ten (10) days of the effective date of the franchise agreement or within ten (10) days of any individual or entity attaining a relevant status (e.g., becoming an Operating Partner or acquiring a 10% ownership interest). Copies of these executed agreements must be furnished to Checkers within ten (10) days of their execution.
A "Competitive Business" is defined as any business that operates as a restaurant or similar food-service provider deriving more than 20% of its revenue from selling hamburgers, cheeseburgers, and hot dogs in a fast-food, quick-service, drive-thru, or drive-in format, or any business that grants franchises or licenses to others to operate such a business (excluding Checkers or Rally's restaurants franchised by Checkers). This definition is important for franchisees to understand, as it clarifies the scope of prohibited competitive activities and ownership interests. The restrictions are designed to protect Checkers' market position and confidential information.