Is a Checkers franchisee allowed to engage in other business activities that conflict with their obligations under the Franchise Agreement?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
I further agree that, during the term of my employment/service/association or ownership participation, I will not, directly or indirectly, engage or participate in any Competitive Business (defined below in this paragraph), any of which such prohibited behavior I understand and hereby explicitly acknowledge would or could be injurious to, or (in Franchisor's sole judgment) have an adverse effect upon, Franchisor's protectable interests in the Confidential Information, the "Checkers" trademark, or the goodwill and/or reputation of Restaurants generally. I agree that I am prohibited from engaging in any Competitive Business as a proprietor, partner, investor, shareholder, director, officer, employee, principal, agent, advisor, or consultant. For purposes of this Agreement, a "Competitive Business" means 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 the preceding subparagraph (i) (other than a "Checkers" or "Rally's"branded restaurant operated under a franchise agreement with Franchisor). Despite the foregoing definition of a Competitive Business, nothing under this Agreement or the Franchise Agreement will prevent Individual from owning for investment purposes less than five percent (5%) of a Competitive Business whose stock or other forms of ownership interest are publicly traded on a recognized United States stock exchange, and so long as neither Individual nor Franchisee controls the company in question.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 64–65)
What This Means (2025 FDD)
According to the 2025 Checkers Franchise Disclosure Document, franchisees are restricted from engaging in any competitive business during the term of their franchise agreement. 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 grants franchises or licenses to others to operate such a business. This restriction aims to protect Checkers' confidential information, trademarks, and the goodwill/reputation of its restaurants.
Specifically, franchisees are prohibited from participating in a Competitive Business as a proprietor, partner, investor, shareholder, director, officer, employee, principal, agent, advisor, or consultant. This broad definition ensures that franchisees cannot be involved in competing ventures in any significant capacity. However, an exception exists allowing franchisees to own less than 5% of a publicly traded Competitive Business for investment purposes, provided they do not control the company.
This non-compete clause is designed to prevent franchisees from diverting business to competitors or using Checkers' confidential information to benefit other ventures. It underscores the importance Checkers places on protecting its brand and market position. Prospective franchisees should carefully consider this restriction and ensure they are not currently involved in any conflicting business activities before entering into a franchise agreement. Franchisees must avoid any activity that could be seen as injurious to Checkers' interests.