If Checkers terminates the franchise agreement due to a franchisee's default, what damages is the franchisee obligated to pay?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
16.06 Early Termination Damages. If we terminate this Agreement as a result of your breach, you and we agree that the amount of damages which we would incur for any such early termination would be difficult, if not impossible, to accurately ascertain. Accordingly, within 30 days following such termination, you shall pay us an amount equal to the average monthly royalty fees and advertising contributions that you owed to us for the past 24 months multiplied by the number of months remaining in the Term ("Early Termination Damages"). If you have not operated the Franchised Restaurant for 24 months prior to the termination of this Agreement, the Early Termination Damages will be calculated by using the average monthly royalties and advertising contributions you owed for the number of months that the Franchised Restaurant operated multiplied by the number of months remaining in the Term. These Early Termination Damages shall constitute liquidated damages and are not to be construed as a penalty and shall be the joint and several liability of you and each of your Owners who personally guarantees your obligations under this Agreement.
The parties acknowledge and agree that: (a) the Early Termination Damages are a reasonable estimation of the damages that we would incur if this Agreement is prematurely terminated; and (b) your payment of such Early Termination Damages is intended to fully compensate us only for any and all damages related to or arising out of our premature termination of this Agreement, and shall not constitute an election of remedies, waiver of any default under this Agreement, nor waiver of our claim for other damages and/or equitable relief arising out of your breach of this Agreement.
The imposition of Early Termination Damages shall be at our sole option. We are not required to impose Early Termination Damages and may, in addition or in lieu thereof, pursue other remedies available to us under the terms and conditions of this Agreement, in equity or at law in the event of your breach under this Agreement, including, without limitation, actual damages we incur, if such can be ascertained. All such remedies shall be cumulative and non-exclusive
16.07 Continuing Obligations. All obligations under this Agreement which expressly or by their nature survive the expiration or termination of this Agreement shall continue in full force and effect until they are satisfied in full or by their nature expire.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, if Checkers terminates the franchise agreement due to a franchisee's breach, the franchisee must pay early termination damages. These damages are calculated by multiplying the average monthly royalty fees and advertising contributions owed for the past 24 months by the number of months remaining in the term. If the restaurant has not been operating for 24 months, the calculation uses the average monthly royalties and advertising contributions owed for the number of months the restaurant has operated, multiplied by the remaining months in the term. These early termination damages are considered liquidated damages and are the joint and several liability of the franchisee and any owners who personally guarantee the franchisee's obligations.
The FDD specifies that these early termination damages are a reasonable estimate of the damages Checkers would incur due to the early termination of the agreement. The payment is intended to compensate Checkers for damages related to the premature termination but does not constitute an election of remedies, a waiver of any default, or a waiver of Checkers' claim for other damages or equitable relief arising from the breach.
It's important to note that imposing early termination damages is at Checkers' sole option. Checkers is not required to impose these damages and may instead, or in addition to, pursue other remedies available under the agreement, in equity, or at law, including actual damages if they can be ascertained. All such remedies are cumulative and non-exclusive. Additionally, all obligations under the agreement that survive termination remain in full effect until satisfied or expired.