If a Checkers franchisee defaults on another agreement with Checkers or its affiliates, how does this affect the franchise agreement?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
Any default or breach by you (or any of your Owners) or your Affiliate (or any of your Owner's Affiliates) of any other agreement with us or our Affiliate will be considered an event of default under this Agreement, and any default or breach by you (or any of your Owners) of this Agreement will be considered an event of default or breach by you under any and all agreements between us or our Affiliate and you (or any of your Owners) or your Affiliate (or any of your Owner's Affiliates).
If the nature of the default under any other agreement would have been considered an event of default under this Agreement, then we or our Affiliate will have the right to terminate all other agreements between us or our Affiliate and you (or any of your Owners) or your Affiliate (or any of your Owner's Affiliates) in accordance with the termination provisions of this Agreement.
Notwithstanding the foregoing, if you are operating under a Development Agreement that terminates solely as a result of your failure to comply with the development schedule set forth in that agreement, then such termination of the Development Agreement will not result in a termination (constructive or otherwise) of this Agreement if you have
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, a default by a franchisee (or their owners/affiliates) on any other agreement with Checkers or its affiliates can trigger a cross-default under the franchise agreement. This means that if a franchisee fails to meet their obligations in one agreement, Checkers can consider it a default under all agreements.
This cross-default provision gives Checkers the right to terminate all other agreements between Checkers (or its affiliates) and the franchisee (or their owners/affiliates). However, there is an exception: if a Development Agreement terminates solely because the franchisee failed to meet the development schedule, it will not automatically trigger termination of the Franchise Agreement, provided the franchisee has fully performed and complied with all obligations under the Franchise Agreement.
This clause is significant for prospective Checkers franchisees, especially those considering multiple locations or other business dealings with Checkers. It highlights the interconnectedness of all agreements and the potential for a single default to have far-reaching consequences. Franchisees need to carefully manage their obligations under all agreements to avoid triggering a cross-default and potential termination of their Checkers franchise.