Can a Checkers franchisee perform services for a Competitive Business during the term of the franchise?
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 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, a franchisee is 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 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. This also includes businesses that grant franchises or licenses to others to operate similar businesses, excluding other Checkers or Rally's franchises.
The restriction extends to various forms of involvement, including being a proprietor, partner, investor, shareholder, director, officer, employee, principal, agent, advisor, or consultant of a Competitive Business. This broad definition aims to prevent any direct or indirect competition with the Checkers franchise. The document specifies that such prohibited behavior could be harmful to Checkers' protectable interests in its confidential information, trademarks, and the goodwill and reputation of its restaurants.
However, there is an exception: a franchisee can own less than 5% of a Competitive Business if its stock is publicly traded on a recognized United States stock exchange, provided that neither the franchisee nor the individual controls the company. This exception allows for minor investment purposes without granting any influence over the Competitive Business. This clause ensures that franchisees remain primarily committed to their Checkers franchise and do not divert their efforts or resources to competing ventures.
This non-compete clause is a standard practice in franchising to protect the brand and maintain a competitive advantage. Prospective franchisees should carefully consider these restrictions and ensure they do not have any conflicting business interests before entering into a franchise agreement with Checkers.