What royalty do the 'Western Licensees' pay to Checkers?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
In 1997, in response to certain issues raised by several Rally's franchisees in California and Arizona, and in a mutual effort to avoid a protracted dispute, we agreed to a material modification of the franchise agreements with the affected California and Arizona Rally's franchisees. The Rally's franchisees are referred to as the "Western Licensees," and they have agreed to execute license agreements to replace their franchise agreements. Under the "Western License Agreement," the Western Licensees will pay a reduced royalty (1% of Net Sales), and we have agreed that the services that we are obligated to provide to them will be materially different from, and will be substantially less than, the services that we provide to franchisees under the Franchise Agreement. Under the Western License Agreement, those Rally's franchisees who elect to obtain advertising material from our advertising agency will pay a license fee of 2% of Net Sales. We do not offer new or additional Western License Agreements as part of this Franchise Disclosure Document.
Source: Item 1 — THE FRANCHISOR AND ANY PARENTS, PREDECESSORS AND AFFILIATES (FDD pages 9–14)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the "Western Licensees," which are Rally's franchisees in California and Arizona who agreed to a modification of their franchise agreements in 1997, pay a reduced royalty fee of 1% of Net Sales. These franchisees entered into a "Western License Agreement" to replace their previous franchise agreements.
In exchange for the reduced royalty rate, Checkers provides materially different and substantially fewer services to the Western Licensees compared to regular franchisees. This suggests that the Western Licensees have more autonomy in their operations but receive less support from the franchisor.
Additionally, if these Western Licensees choose to obtain advertising material from Checkers' advertising agency, they must pay a license fee of 2% of Net Sales. This advertising fee is separate from the standard royalty and is only applicable if the franchisee utilizes Checkers' advertising resources. It's important to note that Checkers does not offer new or additional Western License Agreements as part of the current Franchise Disclosure Document, indicating that this option is not available to new franchisees.