After termination of a Checkers franchise, is a franchisee prohibited from being involved with an entity that grants franchises for a Competitive Business?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
Upon the expiration or other termination for any reason of my employment, association, service or ownership participation, I agree:
(i) to return immediately to Franchisor or Franchisee, as the case may be, all Confidential Information, and any material(s) containing a subset thereof, in my possession that was utilized, or to which I had access,
- during my employment, association, service or ownership participation;
- (ii) to refrain, beginning upon such expiration or termination and forever thereafter, from any and all contacts with customers of Restaurants for any purpose whatsoever; and
- (iii) for a period of two (2) years, starting on the effective date of termination or expiration of my employment/service/association or ownership participation, to refrain from directly or indirectly (such as through any one or more of my spouse, legally-recognized domestic partner, parents, children or sibling(s) (collectively, "Immediate Family")) owning a legal or beneficial interest in, or render services or give advice to: (a) any Competitive Business operating at the Premises or within a three (3)-mile radius of the Premises; (b) any Competitive Business operating within a radius of three (3) miles of any Restaurant in operation or under construction on the effective date of termination or expiration of my employment/service/association/ ownership participation; or (c) any entity which grants franchises, licenses or other interests to others to operate any Competitive Business.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, a franchisee is restricted from involvement with entities that grant franchises for a Competitive Business for a period of two years after termination. Specifically, for a period of two years after the termination or expiration of the franchise, the franchisee is prohibited from owning a legal or beneficial interest in, or rendering services or giving advice to any entity which grants franchises, licenses or other interests to others to operate any Competitive Business.
A Competitive Business is defined as any business that operates as a restaurant or food-service provider deriving more than 20% of its revenue from selling hamburgers, cheeseburgers, and hot dogs in a fast-food, quick-service, drive-thru, or drive-in format. It also includes businesses that grant franchises or licenses to others to operate such restaurants, excluding Checkers or Rally's branded restaurants franchised by Checkers itself.
This restriction is in place to protect Checkers' confidential information, trademarks, and goodwill. The agreement specifies that these covenants are essential to the Franchise Agreement and both Checkers' and the franchisee's interests. This non-compete clause aims to prevent former franchisees from using their knowledge of the Checkers system to benefit competing businesses, ensuring fair competition and protecting the brand's market position.