Must the transferee of a Checkers franchise be an individual?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
corporation, partnership, limited liability company or other legal entity, your Owners. Accordingly, neither you nor any of your Owners may transfer the Franchise without our approval and without complying with all of the provisions of Section 13. Any transfer without such approval or compliance constitutes a breach of this Agreement and is void and of no force or effect.
- 13.02 Conditions for Approval. If we have not exercised our right of first refusal under Section 13.06, we will not unreasonably withhold our approval of a transfer of the Franchise that meets all of the reasonable restrictions, requirements and conditions we impose on the transfer, the transferor(s) and/or the transferee(s), including the following:
- (a) you have completed development of the Franchised Restaurant and are operating the Franchised Restaurant in accordance with this Agreement;
- (b) you and your Owners and Affiliates are in compliance with the provisions of this Agreement and all other agreements with us or any of our Affiliates;
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, if a franchisee wishes to transfer their franchise, the proposed transferee must meet certain conditions to gain approval from Checkers. Specifically, if the proposed transferee is a legal entity, its owners must be individuals acting in their individual capacities. These individuals must be of good character and reputation, possess sufficient business experience, aptitude, and financial resources to operate the franchised restaurant, and otherwise meet Checkers' approval.
This requirement ensures that Checkers maintains control over who operates its franchises and upholds brand standards. By requiring individual owners, Checkers can assess the qualifications and character of the people ultimately responsible for the franchise's performance. This also allows Checkers to avoid dealing with entities that may be subject to complex regulations or reporting requirements, as the proposed transferee cannot be an entity required to comply with the Securities Exchange Act of 1934.
For a prospective Checkers franchisee, this means that if they plan to transfer their franchise in the future, the potential buyer (or the owners of the buying entity) will need to undergo scrutiny to ensure they meet Checkers' standards. This could potentially limit the pool of eligible buyers and impact the sale price or terms of the transfer. Franchisees should be aware of these conditions and factor them into their long-term business plans.
It is important to note that Checkers retains significant discretion in approving or disapproving a transfer. Even if the proposed transferee meets the stated conditions, Checkers can still withhold approval if it has reasonable grounds to do so. Franchisees should maintain open communication with Checkers throughout the transfer process to ensure compliance and facilitate a smooth transaction.