What obligation regarding arbitration exists for claims against Checkers under the Franchise Agreement?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
try of such injunction, shall be its dissolution, if warranted, upon hearing duly had (all claims for damages by reason of the wrongful issuance of any such injunction being expressly waived hereby). You and each of your Owners acknowledge that any violation of Sections 6, 7.02(i) or 9.02 would result in irreparable injury to us for which no adequate remedy at law may be available. Accordingly, you and each of your Owners consent and agree to the issuance of an injunction prohibiting any conduct in violation of any of those sections and agrees that the existence of any claim you or any of your Owners may have against us, whether or not arising from this Agreement, shall not constitute a defense to the enforcement of any of those Sections.
10.06 Arbitration. Subject to Section 10.05, all controversies, disputes, or claims between us or any of our Affiliates, or any of their respective officers, directors, agents, employees and attorneys and you, any of your Affiliates or any of their respective Owners, arising from or relating, directly or indirectly, to (i) this Agreement or any other agreement between you and us or your or our respective Affiliates, (ii) the scope and validity of any provision of this Agreement or any other agreement between you and us or any provision of such agreements (including the validity of the arbitration obligations under this Section 10.06, which the parties acknowledge is to be determined by an arbitrator and not a court); (iii) our relationship with you, including, without limitation, your application to become a franchisee and/or to acquire the right to operate an additional Restaurant, our decision to award a franchise, approve a site or any other matter related to your franchise application or site selection process for the Restaurants you develop under this Agreement or for an additional Restaurant; or (iv) any of our specifications and standards, shall on demand of either party be submitted for arbitration to the offices of the American Arbitration Association ("AAA") located closest to our corporate headquarters at the time of such demand. The arbitration shall be governed exclusively by the United States Federal Arbitration Act (9 U.S.C. § 1, et seq.), without reference to any state arbitration statutes. The parties agree that, in connection with any such arbitration proceeding, each shall submit or file any claim which would constitute a compulsory counterclaim (as defined by Rule 13 of the Federal Rules of Civil Procedures) within the same proceeding as the claim to which it relates. Any such claim which is not submitted or filed in such proceeding shall be waived and such party will forever be barred from asserting such a claim. Settlement discussions occurring between the parties in relation to any dispute falling within the scope of this Section 10.06 shall be protected by Federal Rule of Evidence 408 and all other applicable rules limiting and/or precluding disclosure. The parties further agree that unless otherwise agreed in writing, neither side shall be permitted to disclose any settlement discussions to the arbitrators for any reason and that the arbitrators may not consider any settlement discussions or offers that might have been made by either you or us prior to commencing the arbitration proceeding.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, franchisees are generally required to submit to arbitration for disputes. Section 10.06 of the Franchise Agreement stipulates that all controversies, disputes, or claims between Checkers and a franchisee (including their affiliates, owners, officers, directors, agents, employees, and attorneys) arising from or relating to the Franchise Agreement or any other agreement, the scope and validity of any provision of the agreements, the relationship between Checkers and the franchisee, or Checkers's specifications and standards, must be submitted for arbitration upon demand by either party. This arbitration takes place under the rules of the American Arbitration Association (AAA) located closest to Checkers's corporate headquarters.
The arbitration process is governed exclusively by the United States Federal Arbitration Act, without reference to any state arbitration statutes. Franchisees must submit any claim that would constitute a compulsory counterclaim within the same proceeding as the claim to which it relates, or else that claim is waived. Settlement discussions are protected by Federal Rule of Evidence 408, and neither party is permitted to disclose any settlement discussions to the arbitrators, nor may the arbitrators consider any settlement offers made prior to commencing the arbitration proceeding.
However, there are exceptions to this arbitration obligation. For franchisees governed by the Maryland Franchise Registration and Disclosure Law, the arbitration obligation is subject to the right to commence a lawsuit against Checkers in Maryland for claims arising under that law. Additionally, a federal court held that a similar provision of the Michigan law was preempted by the Federal Arbitration Act and therefore is not enforceable, and Checkers intends to enforce the arbitration clause as it is written in the agreements.