Can Checkers refuse a transfer of ownership of a franchise for reasons other than 'good cause'?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
- (g) A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause. This subdivision does not prevent a franchisor from exercising a right of first refusal to purchase the franchise. Good cause shall include, but is not limited to:
- (i) The failure of the proposed transferee to meet the franchisor's then current reasonable qualifications or standards.
- (ii) The fact that the proposed transferee is a competitor of the franchisor or subfranchisor.
- (iii) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
- (iv) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the franchisor's ability to refuse a transfer of ownership depends on the specific jurisdiction. In general, Checkers requires approval for any transfer of development rights, and any transfer without this approval is considered a breach of the agreement. However, some states have laws that impact Checkers' ability to deny a transfer.
For example, the FDD states that a provision permitting Checkers to refuse a transfer of ownership, "except for good cause" is in effect. The definition of "good cause" includes the proposed transferee's failure to meet Checkers' qualifications, being a competitor, unwillingness to comply with obligations, or failure to pay sums owed. This clause does not prevent Checkers from exercising a right of first refusal to purchase the franchise.
In Maryland, the release and covenant not to sue may not apply to the extent prohibited by the Maryland Franchise Registration and Disclosure Law. In Virginia, any ground for default or termination stated in the franchise agreement that does not constitute "reasonable cause" under the Virginia Retail Franchising Act may not be enforceable. Therefore, prospective franchisees should be aware of the specific laws in their state regarding franchise transfers and consult with a legal professional to understand their rights and obligations.