What are the consequences of termination and expiration as described in Section 9 of the Checkersrallys Restaurant Development Agreement?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
- 9.01 Continuing Obligations. All obligations under this Agreement which expressly or by their nature survive the expiration or termination of this Agreement shall continue in full force and effect until they are satisfied in full or by their nature expire.
- 9.02 Post-Term Covenants. For a period of 2 years, starting on the effective date of termination or expiration (without renewal or extension of the Term) of this Agreement, you are prohibited from directly or indirectly (such as through an Immediate Family member) owning a legal or beneficial interest in, or render services or give advice to: (a) any Competitive Business operating within the Development Area; (b) any Competitive Business operating within a radius of three (3) miles of any "Checkers" or "Rally's"-branded restaurant in operation or under construction on the effective date of termination or expiration; or (c) any entity which grants franchises, licenses or other interests to others to operate any Competitive Business. You acknowledge that we have a protectable legal interest in the System, customers of Restaurants and the goodwill associated with the Marks and that the non-competition covenants contained in this Section and Section 6.02 are necessary elements to their protection and are an integral part of this Agreement. You and each of your Owners expressly acknowledge the possession of skills and abilities of a general nature and other opportunities for exploiting such skills, so that enforcement of the covenants contained in this Section will not deprive you of your personal goodwill or ability to earn a living. If you fail or refuse to abide by any of the foregoing covenants, and we obtain enforcement in a judicial or arbitration proceeding, the obligations under the breached covenant will be tolled during the period(s) of time that the covenant is breached and/or we seek to enforce it, and will continue in effect for a period of 2 years after the date of order enforcing the covenant.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, Section 9.01 states that all obligations within the Restaurant Development Agreement that either expressly or by their nature are meant to survive the termination or expiration of the agreement will remain in effect until they are completely fulfilled or naturally expire. This means that certain responsibilities and duties a franchisee has to Checkersrallys do not simply vanish when the agreement ends. Instead, these obligations continue to bind the franchisee.
The FDD also outlines post-term covenants in Section 9.02. For two years after the termination or expiration of the agreement, the franchisee is prohibited from being involved with any Competitive Business within the Development Area, within a three-mile radius of any Checkers or Rally's restaurant, or with any entity that franchises Competitive Businesses. This restriction extends to the franchisee's Immediate Family as well. Checkersrallys states that this non-compete clause is essential to protect their legal interest in the System, customer base, and the goodwill associated with their Marks.
The agreement emphasizes that franchisees possess general skills and opportunities, and enforcing these covenants will not deprive them of their ability to earn a living. If a franchisee violates the non-compete agreement, Checkersrallys can pursue legal action. If Checkersrallys successfully enforces the covenant through judicial or arbitration proceedings, the franchisee's obligations under the breached covenant will be suspended during the period of the breach and while Checkersrallys seeks enforcement. The covenant will then remain in effect for two years after the date of the enforcement order. This ensures that Checkersrallys can protect its market position and brand integrity even after a franchise agreement ends.