Can Checkers terminate the agreement if a franchisee fails to meet the Development Schedule?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
|---|---|---| | grant the right to operate, any "Checkers" or “Rally’s”-branded restaurants located within the | | | | | | | Development Area, | except for: | (1) franchises granted | pursuant to this | Agreement; | (2) |
EXHIBIT A TO THE RESTAURANT DEVELOPMENT AGREEMENT
| 7.04 | Special Transfers. | Neither Section | 7.06 | nor Section 7.2(f) apply to any | |---|---|---|---|---| by which the Restaurant must be opened; and (ii) the amount of initial franchise fee, if those
timelines are met.
| on , under the laws of the State of . It has not conducted | | | |---|---|---| | business under any name other than its partnership name. The following is a list of all of Area | | | | Franchisee’s general partners as of | , | . | If (i) you fail to meet any of the timelines listed in the chart of Section 3(b), (ii) you fail to maintain Property Control after the Property Control Date, or (iii) you or any of your affiliates are in breach of any term or condition under this Agreement or any other agreements with us, the initial franchise fee for that particular Restaurant as well as all subsequent Restaurants to be developed hereunder will, without notice to you automatically readjust to the standard amount of $30,000 (regardless of the initial franchise fee amount listed in the Section 3(b) chart).
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
Based on the 2025 Checkers Franchise Disclosure Document, failure to meet the development schedule outlined in Section 3(b) of the franchise agreement does not automatically trigger termination. However, it does have financial implications for the franchisee. Specifically, if a Checkers franchisee fails to meet the timelines in the development schedule, the initial franchise fee for the restaurant in question, as well as for all subsequent restaurants to be developed under the agreement, will be readjusted to the standard amount of $30,000. This readjustment occurs without any prior notice to the franchisee, regardless of the initial franchise fee amount that was originally listed in the Section 3(b) chart.
This provision means that franchisees who fail to adhere to the development schedule lose any potential reduction in the initial franchise fee that they might have been entitled to under the original agreement. The standard initial franchise fee reduction will not apply to any franchise agreement connected with a renewal or transfer of a restaurant. This creates a financial disincentive for franchisees to fall behind on their development obligations, as they will be required to pay the full initial franchise fee for each subsequent location.
Furthermore, the development fee, which is $10,000 for each restaurant to be developed, is non-refundable under any circumstances, including the franchisee's failure to develop any of the restaurants contemplated under the agreement. This fee is deemed earned by Checkers upon payment. For each franchise agreement that the franchisee enters into according to the development schedule, Checkers will apply $10,000 of the development fee against the initial franchise fee due under the franchise agreement until the development fee is fully applied. Therefore, while failure to meet the development schedule does not lead to immediate termination, it results in the loss of reduced franchise fees and the non-refundable nature of the development fee, potentially increasing the overall cost of expanding the franchise.