After the Checkersrallys agreement is terminated or expires, what is the geographic scope of the non-compete restriction?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
| PROVISION | SECTION IN FRANCHISE OR OTHER AGREEMENT | SUMMARY | |
|---|---|---|---|
| o. | Franchisor's option to purchase developer's development rights | Not applicable | Not applicable |
| p. | Death or disability of developer | Section 7.05 | Franchise must be assigned by estate to approved buyer within nine months. |
| q. | Non-competition covenants during the term of the agreement | Section 6.02 | No involvement in any competing business regardless of its location. |
| r. | Non-competition covenants after the agreement is terminated or expires | Section 9.02 | No competing business for 2 years within your Development Area or within 3 miles of any other Checkers Restaurant or Rally's Restaurant. |
| s. | Modification of the agreement | Section 10.10 | No modifications except by written agreement signed by both parties. |
| t. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION THE FRANCHISE RELATIONSHIP (FDD pages 66–71)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the geographic scope of the non-compete covenant after the agreement is terminated or expires depends on whether the franchisee has a Development Agreement or a Franchise Agreement. For franchisees with a Development Agreement, the non-compete restriction extends to their Development Area and within 3 miles of any other Checkers Restaurant or Rally's Restaurant. For franchisees with a Franchise Agreement, the non-compete extends to the Premises of the Franchised Restaurant, or within 3 miles of the Franchised Restaurant or any other Checkers Restaurant or Rally's Restaurant. This restriction lasts for a period of 2 years.
For a prospective Checkersrallys franchisee, this means that after the termination or expiration of their franchise agreement, they are restricted from operating a competing business within the specified geographic area. The geographic scope differs slightly based on whether the agreement is a Development Agreement or a Franchise Agreement. If a franchisee has a Development Agreement, the non-compete is based on the Development Area. If the franchisee has a Franchise Agreement, the non-compete is based on the specific restaurant location.
This non-compete agreement aims to protect Checkersrallys's market and brand presence by preventing former franchisees from directly competing with existing locations. Franchisees should carefully consider the implications of this restriction, especially if they plan to remain in the same geographic area after leaving the Checkersrallys system. It is important to understand the definition of "competing business" as defined in the franchise agreement to fully grasp the scope of this restriction.
It is also important to note that the non-compete agreement lasts for 2 years, which could significantly impact a franchisee's ability to pursue other business ventures in the restaurant industry within the restricted area. Franchisees should evaluate their long-term career goals and potential business opportunities in light of this restriction before entering into a franchise agreement with Checkersrallys.