What are the potential consequences for a Checkers franchisee who fails to pay royalties on time, as outlined in Item 6?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
operating procedure prescribed by us in this Agreement or in Operations Manual relating to the cleanliness or sanitation of the Franchised Restaurant or violate any health, safety or sanitation law, ordinance or regulation and do not correct such failure or refusal within twenty-four (24) hours after written notice thereof is delivered to you;
- (l) fail to report accurately Net Sales or to make payment of any amounts due us or any of our Affiliates, and do not correct such failure within ten (10) days after written notice of such failure is delivered to you;
- (m) understate the Franchised Restaurant's Net Sales three (3) times or more during the Term or by more than five percent (5%) on any one occasion;
- (n) fail to make a timely payment of any amount due to a supplier unaffiliated with us (other than payments which are subject to bona fide dispute), and do not correct such failure within thirty (30) days after we deliver to you notice of such failure to comply;
- (o) fail to comply with any other provision of this Agreement or any mandatory specification, standard or operating procedure prescribed by us in this Agreement or in Operations Manual and do not correct such failure within thirty (30) days after notice of such failure to comply is delivered to you;
What This Means (2025 FDD)
According to the 2025 Checkers Franchise Disclosure Document, a franchisee's failure to make timely royalty payments can lead to significant repercussions. Specifically, if a Checkers franchisee fails to accurately report net sales or make required payments to Checkers or its affiliates and does not correct this within ten days of written notice, it constitutes a breach of the franchise agreement. This failure to pay royalties on time can trigger default clauses within the agreement.
Furthermore, the Checkers franchise agreement specifies that understating the franchised restaurant's net sales three or more times during the term, or by more than 5% on any single occasion, also constitutes a breach. Additionally, if a franchisee fails on three or more separate occasions within a 12-month period to submit timely reports or pay royalties when due, regardless of whether the failure is corrected after notice, it is considered a breach of contract.
These breaches can lead to the termination of the franchise agreement, as evidenced by Checkers's litigation history with former franchisees, such as Baby Buford, LLC, which was terminated for failing to pay required advertising contributions. Moreover, a default under the Checkers franchise agreement can trigger a cross-default, meaning that any breach of another agreement with Checkers or its affiliates can also be considered a default under the franchise agreement, and vice versa. This interconnectedness of agreements underscores the importance of adhering to all contractual obligations to maintain good standing with the Checkers franchise system.