If a covenant restricting competitive activity in the Checkers franchise agreement is deemed unenforceable, how will it be handled?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
s imposed on our income). Payment of all such taxes shall be your responsibility. In the event of a bona fide dispute as to your liability for taxes, you may contest your liability in accordance with applicable law. In no event, however, will you permit a tax sale, seizure, or attachment to occur against the Franchised Restaurant or any of its assets.
18. MISCELLANEOUS.
18.01 Severability and Substitution of Provisions. Every part of this Agreement shall be considered severable. If for any reason any part of this Agreement is held to be invalid, that determination shall not impair the other parts
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of this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the franchise agreement includes a severability and substitution clause to address situations where any part of the agreement is deemed invalid or unenforceable. Specifically, if a covenant restricting competitive activity is considered unenforceable due to its scope (geographical area, type of business activity, or length of time), Checkers and the franchisee agree that it will be enforced to the fullest extent permissible under applicable law and public policy. This means a court would likely reduce the scope of the restriction to make it enforceable rather than striking it down entirely.
This clause protects Checkers' interests by ensuring that some form of non-compete agreement remains in place, even if the original terms are deemed too broad. It also provides a degree of certainty for the franchisee, as it clarifies that the non-compete will be enforced to the maximum extent allowed by law. This approach is fairly common in franchise agreements, as franchisors seek to protect their brand and market share while also complying with legal requirements regarding non-compete clauses.
For a prospective Checkers franchisee, this means that while the initial non-compete agreement might seem restrictive, there is a mechanism in place to adjust it if necessary. It is important to understand the specific terms of the non-compete and how they might be applied in your particular situation. Franchisees should consult with an attorney to fully understand the implications of this clause and how it might affect their future business opportunities should they leave the Checkers system.