Does Checkersrallys' approval of a franchise transfer constitute a representation as to the fairness of the terms between the transferor and transferee or the transferee's prospects of success?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
13.03 Effect of Approval.Our approval of a transfer of the Franchise does not constitute: (a) a representation as to the fairness of the terms of any agreement or arrangement between you or your Owners and the transferee or as to the prospects of success of the Franchised Restaurant by the transferee; or (b) a release of you and your Owners, a waiver of any claims against you or your Owners or a waiver of our right to demand the transferee's exact compliance with this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the approval of a franchise transfer does not represent the fairness of the terms between the transferor and transferee, nor does it guarantee the transferee's success. This means that Checkersrallys's consent to a transfer is simply an acknowledgement that the necessary conditions for the transfer have been met, and it should not be interpreted as an endorsement of the financial terms agreed upon by the parties involved or a prediction of the future performance of the franchise under new ownership.
This provision protects Checkersrallys from potential liability or disputes arising from the transfer agreement between the franchisee and the new owner. Prospective franchisees should not assume that Checkersrallys has vetted the transfer agreement for fairness or that the franchise is guaranteed to succeed under new management simply because the transfer was approved. The responsibility for assessing the terms of the transfer and the potential for success lies solely with the parties involved in the transfer.
It is common practice in franchising for franchisors to retain control over franchise transfers to maintain brand standards and ensure that new franchisees meet their operational and financial criteria. However, franchisors typically do not take on the role of arbitrating the financial terms of the transfer agreement or guaranteeing the success of the new franchisee. This is because the franchisor does not have complete insight into the financial circumstances of either party and cannot control the new franchisee's management decisions.
Therefore, a prospective Checkersrallys franchisee should conduct thorough due diligence on the franchise opportunity, including a careful review of the franchise agreement, market conditions, and financial projections, before agreeing to a transfer. It is advisable to seek independent legal and financial advice to assess the fairness of the transfer terms and the potential for success under new ownership. Relying solely on Checkersrallys's approval of the transfer could lead to unforeseen risks and financial losses.