What is the impact on the existing Checkers franchise agreement if the transferee executes a new agreement?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
ture, equipment, signs and supplies in accordance with our then current requirements and specifications for Restaurants within the time period we specify following the effective date of the transfer (we will advise the transferee before the effective date of the transfer of the specific actions that it must take and the time period within which such actions must be taken);
- (i) you must ensure that we receive, before we will approve any proposed transferee to begin conducting business activities at the Franchised Restaurant as its authorized operator, a transfer fee equal to Twenty Thousand Dollars ($20,000) (or, if the proposed transferee is a then-current franchisee of a Restaurant, a transfer fee equal to Ten Thousand Dollars ($10,000)), provided, however, if this Agreement is being transferred as part of a transaction involving franchise agreements for multiple Restaurants and the franchise agreement for each Restaurant will be transferred on the same day, notwithstanding anything to the contrary in any other franchise agreement governing another Restaurant that is included as part of the transfer, the transfer fee will be Twenty Thousand Dollars ($20,000) or Ten Thousand Dollars ($10,000) for the first Restaurant, depending on whether the transfer is to a new franchisee or a then-current franchisee, plus Five Thousand Dollars ($5,000) for each additional Restaurant to be transferred;
- (i) you and your Owners and Affiliates must, except to the extent limited or prohibited by applicable law, execute a general release, in form and substance satisfactory to us, of any and all claims against us and our Affiliates, stockholders, officers, directors, employees, agents, successors and assigns;
- (j) we must not have disapproved the material terms and conditions of such transfer (including the price and terms of payment) on the basis that they are
so burdensome as to be likely, in our judgment, to adversely affect the transferee's operation of the Franchised Restaurant or its compliance with its franchise agreements and any development agreements;
- (k) if you (or any of your Owners or Affiliates) finance any part of the sale price of the transferred interest, you and/or your Owners or Affiliates must agree that all obligations of the transferee, and security interests reserved by any of them in the assets of the Franchised Restaurant, will be subordinate to the transferee's obligations to pay all amounts due us and our Affiliates and to otherwise comply with this Agreement or the new franchise agreement executed by the transferee;
- (l) you (and your Immediate Family) will not, for two (2) years beginning on the transfer's effective date, engage in any of the activities proscribed in Section 16.03 below; and
- (m) you and your Owners and Affiliates must execute such other documents and do such other things as we may reasonably require to protect our rights under this Agreement and under any development agreement.
- 13.03 Effect of Approval. Our approval of a transfer of the Franchise does not constitute: (a) a representation as to the fairness of the terms of any agreement or arrangement between you or your Owners and the transferee or as to the prospects of success of the Franchised Restaurant by the transferee; or (b) a release of you and your Owners, a waiver of any claims against you or your Owners or a waiver of our right to demand the transferee's exact compliance with this Agreement. Any approval shall apply only to the specific transfer of the Franchise being proposed and shall not constitute an approval of, or have any bearing on, any other transfer of the Franchise.
- 13.04 Special Transfers. Neither Section 13.06 nor Section 13.02(a), (c), (f) or (h) shall apply to any transfer of the Franchise among any of your then current Owners. Neither Section 13.06 nor Section 13.02(h) or (j) shall apply to any transfer of the Franchise to any member of your Immediate Family or the Immediate Family of a then current Owner of Franchisee (if a business corporation, partnership, limited liability company or other entity).
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to the 2025 Checkers Franchise Disclosure Document, when a franchise is transferred, several conditions apply to the existing franchise agreement. The transferor (the original franchisee) is required to execute a general release of all claims against Checkers and its affiliates, except where prohibited by law. This means the seller gives up any legal rights to sue Checkers related to the franchise agreement.
Additionally, if the original franchisee finances any part of the sale, their obligations and any security interests they hold in the restaurant's assets must be subordinate to the transferee's obligations to Checkers. In simpler terms, Checkers gets paid first if the new franchisee defaults. The original franchisee (and their immediate family) also agrees not to engage in activities proscribed in Section 16.03 for two years after the transfer, which likely refers to non-compete restrictions. The original franchisee must also execute any other documents Checkers deems necessary to protect its rights under the agreement.
Checkers's approval of a transfer does not represent any guarantee of the fairness of the sale terms or the new franchisee's success. It also doesn't release the original franchisee from liabilities or waive Checkers's right to demand compliance from the new franchisee. The approval applies only to the specific transfer and doesn't affect any other potential transfers. The transferee (the new franchisee) may also be required to upgrade or remodel the restaurant to meet Checkers's current standards, with specific actions and timelines communicated before the transfer's effective date.
Before Checkers approves the transfer and allows the new franchisee to begin operations, the original franchisee must ensure Checkers receives a transfer fee. The transfer fee is $20,000, but if the transferee is an existing Checkers franchisee, the fee is reduced to $10,000. If the transfer involves multiple restaurants being transferred on the same day, the fee is $20,000 (or $10,000 for a current franchisee) for the first restaurant, plus $5,000 for each additional restaurant.