Under what circumstances, other than franchises granted pursuant to the Development Agreement, is Checkers permitted to operate or grant the right to operate Checkers or Rally's-branded restaurants within the Development Area?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
in accordance with Section 3, at least that cumulative number of franchises for Restaurants set forth in Exhibit A, all of which are to be located within the geographical area described in Exhibit A (the "Development Area"); and (b) not operate (directly or through an Affiliate), nor 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) "Checkers" and "Rally's"-branded restaurants open (or under commitment to open) as of the Effective Date; (3) "Checkers"-branded restaurants, "Rally's"-branded restaurants or other restaurants using any part or all of the System and/or Marks at any sites, locations or venues in the Development Area that independently generate customer traffic flow separate from the general customer traffic flow of the surrounding area, or by their nature are not tied to a particular physical location, including, without limitation: military bases, transportationrelated venues (e.g., airports, train or bus stations, marinas, travel plazas or toll roads), sports or entertainment venues (e.g., stadiums, arenas, concert halls), major industrial or office complexes, hotels, educational facilities (e.g., school, college, and university campuses), casinos, hospitals and related rehabilitation or healthcare facilities, governmental institutions, amusement or recreational facilities (e.g., theme parks, outdoor municipal parks, zoos, or museums), grocery stores or departments stores, mobile-based channels of distribution (e.g., roving food trucks), any co-branding locations or business endeavors where a restaurant's operations are inextricably associated with, or such operations are contained within or sharing the same physical building or operational premises as, another business (such as, for example and without limitation, a gas/convenience store or another restaurant concept), and mobile units located temporarily at special events, such as sports or entertainment events; and (4) restaurants that we purchase (or as to which we purchase the rights as franchisor) that are part of another franchise system or chain, regardless whether such restaurants are converted to operations as "Checkers" or "Rally's"-branded restaurants using any of the Marks and/or the System or whether such restaurants operate under other trademarks, service marks or trade dress and/or use other operating systems.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, Checkers retains certain rights within the Development Area, even when a Development Agreement is in place. Besides franchises granted under the Development Agreement, Checkers can operate or grant the right to operate Checkers or Rally's-branded restaurants under the following specific conditions: restaurants that were already open or under commitment to open as of the Development Agreement's effective date; restaurants located in venues that generate their own customer traffic independent of the surrounding area, such as military bases, transportation hubs (airports, train stations), sports and entertainment venues, industrial complexes, hotels, educational facilities, casinos, hospitals, governmental institutions, amusement parks, grocery stores, and mobile food trucks; co-branding locations where the Checkers or Rally's restaurant is integrated with another business like a gas station or convenience store; and restaurants that Checkers purchases as part of another franchise system or chain, regardless of whether they are converted to Checkers or Rally's restaurants or operate under a different brand.
This reservation of rights has significant implications for potential franchisees entering into a Development Agreement with Checkers. While the agreement grants the franchisee the right to develop a specific area, Checkers retains considerable flexibility to establish restaurants through alternative channels. This could lead to direct competition within the franchisee's territory from corporate-owned stores or other franchisees operating under different agreements.
Prospective franchisees should carefully evaluate the potential impact of these reserved rights on their investment. Understanding the types of locations and alternative channels Checkers might pursue is crucial for assessing the true market potential of the Development Area. Franchisees should engage in detailed discussions with Checkers to clarify their development plans and how they might affect the franchisee's business. This due diligence will help franchisees make informed decisions about the risks and opportunities associated with a Checkers Development Agreement.
It is important to note that the FDD specifies that Checkers retains the right to be acquired by a business that operates or franchises competitive businesses, even within the Development Area. This adds another layer of complexity, as a new parent company could potentially introduce competing brands into the franchisee's territory. Franchisees should consider this possibility and its potential impact on their long-term business prospects.