What is Checkers' right if a franchisee desires to transfer the Development Rights for legal consideration?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
If you or any of your Owners desires to transfer the Development Rights for legal consideration, you or such Owner(s) must obtain a bona fide, executed written offer and earnest money deposit in the amount of at least 5% of the offering price from a responsible and fully disclosed purchaser and must deliver immediately to us a complete and accurate copy of such offer.
If the offeror proposes to buy any other property or rights from you or any of your Owners or Affiliates (other than rights under development and franchise agreements for Restaurants) as part of the bona fide offer, the proposal for such property or rights must be set forth in a separate, contemporaneous offer that is fully disclosed to us, and the price and terms of purchase offered to you or your Owners for
the transfer of the Development Rights must reflect the bona fide price offered therefor and not reflect any value for any other property or rights.
We have the option, exercisable by notice delivered to you and your Owners within 30 days from the date of delivery of a complete and accurate copy of such offer to us, to purchase such interest in this Agreement or in Area Franchisee for the price and on the terms and conditions contained in such offer, provided that: (a) we may substitute cash for any form of payment proposed in such offer; (b) our credit shall be deemed equal to the credit of any proposed purchaser; and (c) we shall have not less than 90 days from the option exercise date to consummate the transaction. We have the right to investigate and analyze the business, assets and liabilities and all other matters we deem necessary or desirable in order to make an informed investment decision with respect to the fairness of the terms of the right of first refusal. We may conduct such investigation and analysis in any manner we deem reasonably appropriate, and you and your Owners must cooperate fully with us in connection therewith.
If we exercise our option to purchase, we will be entitled to purchase such interest subject to all representations and warranties, releases, non-competition covenants, closing documents and indemnities as we may reasonably require. If we do not exercise our option to purchase, you or your Owners may complete the sale to such offeror pursuant to and on the exact terms of such offer, subject to our approval of the transfer as provided in Sections 7.01 and 7.02, provided that if the sale to such offeror is not completed within 90 days after delivery of such offer to us, or if there is a material change in the terms of the offer, you must promptly notify us and we have an additional option to purchase (on the terms of the revised offer, if any, and otherwise as set forth herein) during the 30 day period following your notification of the expiration of the 90 day period or a material change to the terms of the offer.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, if a franchisee or their owners wish to transfer their Development Rights for legal consideration, they must first obtain a bona fide, executed written offer along with an earnest money deposit of at least 5% of the offering price from a responsible and fully disclosed purchaser. The franchisee must then provide Checkers with a complete and accurate copy of this offer. If the offer includes the purchase of other property or rights beyond the Development Rights, these must be outlined in a separate, contemporaneous offer that is fully disclosed to Checkers, ensuring the price for the Development Rights reflects only their bona fide value.
Checkers has the option to purchase the franchisee's interest in the agreement or the Area Franchisee for the price and terms specified in the offer. This option must be exercised within 30 days of receiving the offer. Checkers can substitute cash for any proposed form of payment, and their credit is considered equal to that of any proposed purchaser. Checkers has at least 90 days from the option exercise date to complete the transaction. Checkers also has the right to investigate the business, assets, and liabilities to assess the fairness of the offer, and the franchisee must cooperate fully with this investigation.
If Checkers exercises its option to purchase, it will be entitled to the interest subject to representations, warranties, releases, non-competition covenants, closing documents, and indemnities that Checkers may reasonably require. If Checkers does not exercise its option within the 30-day period, the franchisee may proceed with the sale to the original offeror, provided the sale is completed within 90 days of the original offer date and the terms remain identical. Any material change in the terms or failure to complete the sale within 90 days requires the franchisee to notify Checkers, which then has an additional 30-day option to purchase under the revised terms.
This right of first refusal allows Checkers to maintain control over who enters their franchise system and ensures that any transfer of Development Rights aligns with their strategic interests. For a prospective franchisee, this means that selling their Development Rights is not a straightforward process and requires Checkers' approval or opportunity to purchase the rights themselves, potentially complicating exit strategies.