If an Area Franchisee defaults and Checkers terminates the agreement, what damages is the Area Franchisee responsible for?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
If Area Franchisee commits any act of default under this Agreement for which Franchisor exercises its right to terminate this Agreement, Area 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. Area Franchisee acknowledges and agrees that the proximate cause of such damages sustained by Franchisor is Area Franchisee's act of default and not Franchisor's exercise of its right to terminate.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, if an Area Franchisee defaults on the Area Franchise Agreement and Checkers terminates the agreement, the Area Franchisee is responsible for paying Checkers all actual, consequential, special, and incidental damages that Checkers incurs. These damages are a result of the premature termination of the agreement, regardless of whether or not such damages are reasonably foreseeable.
This means that Checkers can seek compensation for a wide range of losses stemming from the termination. These damages can include lost profits, costs associated with finding a replacement franchisee, and any other expenses Checkers incurs due to the default. The FDD clarifies that the Area Franchisee's act of default is the direct cause of these damages, not Checkers' decision to terminate the agreement.
This clause highlights the significant financial risk associated with defaulting on the Area Franchise Agreement. Prospective Area Franchisees should carefully consider their ability to meet the obligations of the agreement and the potential financial consequences of failing to do so. It is advisable to consult with a legal and financial professional to fully understand the implications of this clause before entering into an agreement with Checkers.