Under what circumstances is Checkers required to compensate a franchisee for inventory, supplies, equipment, fixtures, and furnishings if they refuse to renew the franchise?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
- (d) A provision that permits a franchisor to refuse to renew a franchise without fairly compensating the franchisee by repurchase or other means for the fair market value at the time of expiration of the franchisee's inventory, supplies, equipment, fixtures, and furnishings. Personalized materials which have no value to the franchisor and inventory, supplies, equipment, fixtures, and furnishing not reasonably required in the conduct of the franchise business are not subject to compensation. This subsection applies only if: (i) the term of the franchise is less than 5 years and (ii) the franchisee is prohibited by the franchise or other agreement from continuing to conduct substantially the same business under another trademark, service mark, trade name, logotype, advertising, or other commercial symbol in the same area subsequent to the expiration of the franchise or the franchisee does not receive at least 6 months advance notice of franchisor's intent not to renew the franchise.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, Checkers is required to compensate a franchisee if they refuse to renew the franchise under specific conditions. This compensation involves repurchasing or using other means to provide fair market value for the franchisee's inventory, supplies, equipment, fixtures, and furnishings at the time of expiration. However, this requirement does not extend to personalized materials that hold no value for Checkers, or to items not reasonably required for operating the franchise.
This compensation is only applicable if two conditions are met. First, the franchise term must be less than 5 years. Second, the franchisee must be prohibited from continuing a similar business under a different brand in the same area after the franchise expires. Alternatively, compensation is required if the franchisee does not receive at least 6 months' advance notice of Checkers' intent not to renew the franchise agreement.
This provision protects franchisees in shorter-term agreements or those heavily restricted post-termination, ensuring they are not left with unusable assets without sufficient notice. It is important for prospective franchisees to understand these conditions, as they significantly impact the financial implications of non-renewal. Franchisees should carefully review the franchise agreement to determine the length of the term, any restrictions on operating a similar business post-expiration, and the required notice period for non-renewal to fully understand their rights to compensation.