What was the reason Checkers terminated the franchise agreements with Baby Buford, LLC?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
or the Southern District of Florida
Baby Buford, LLC, Baby Buford HP, LLC, Baby Buford Warren, LLC, Baby Buford 8 Mile, LLC, Baby Buford Southfield, LLC, Baby Buford 23 Mile Road, LLC, Baby Buford Livernois, LLC, Baby Buford Woodward, LLC, Baby Buford 14 Mile, LLC, Baby Buford Port Huron, LLC, Baby Buford Ypsilanti, LLC, Baby Buford Sylvan Lake, LLC, and Baby Buford Harper, LLC (collectively hereafter referred to as "Baby Buford") are former Checkers franchisees. On December 19, 2019, we terminated the franchise agreements based on failure
to pay required advertising contributions. On March 30, 2020, Baby Buford filed a single Demand for Arbitration against us seeking $299,999 in damages and alleging that (i) their franchise agreements had been wrongfully terminated in violation of the Michigan Franchise Investment Law, and (ii) we misappropriated and comingled advertising contributions made by Baby Buford. We deny any wrongdoing in this matter and all claims made by Baby Buford. On April 27, 2020, we filed a Petition to Compel Arbitration in Federal Court in which we asserted that the franchise agreements require a separate arbitration for each franchise entity. The Court agreed and, on January 6, 2021, the Court entered an Order staying the current arbitration and requiring separate arbitrations should Baby Buford wish to proceed. The claimants have taken no further action since the Court's January 6, 2021 order and do not appear to be actively pursuing their claims, although the arbitration action has not been withdrawn at this time.
Source: Item 3 — LITIGATION (FDD pages 15–17)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, the franchise agreements with Baby Buford, LLC, and its related entities were terminated on December 19, 2019, due to a failure to pay required advertising contributions. Baby Buford, LLC, subsequently filed a Demand for Arbitration against Checkers seeking $299,999 in damages, alleging wrongful termination and misappropriation of advertising contributions. Checkers denied any wrongdoing and filed a Petition to Compel Arbitration, asserting that each franchise entity required a separate arbitration. The court agreed with Checkers on January 6, 2021, staying the current arbitration and requiring separate arbitrations should Baby Buford wish to proceed. As of the FDD's publication, Baby Buford has taken no further action, though the arbitration action has not been withdrawn.
This litigation is relevant for prospective Checkers franchisees as it highlights a potential risk of disputes and legal actions arising from franchise agreement terms, specifically regarding advertising contributions. Franchisees are typically required to contribute a percentage of their revenue to a common advertising fund, and failure to meet these obligations can lead to termination. The dispute with Baby Buford also underscores the importance of understanding the arbitration clauses within the franchise agreement, as these clauses can dictate the process for resolving disputes and may require individual arbitrations for each franchise location.
Prospective franchisees should carefully review the advertising contribution requirements and termination clauses in the Checkers franchise agreement. It is also advisable to consult with an attorney to fully understand the implications of the arbitration provisions and potential legal risks associated with the franchise. Understanding these aspects can help franchisees avoid similar disputes and protect their investment.