What constitutes 'good cause' for Checkersrallys to terminate a franchise agreement?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
Each of the following provisions is void and unenforceable if contained in any documents relating to a franchise:
(c) A provision that permits a franchisor to terminate a franchise prior to the expiration of its term except for good cause. Good cause shall include the failure of the franchisee to comply with any lawful provision of the franchise agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than 30 days, to cure such failure.
8.02 Termination Upon Notice.
In addition to our right to terminate pursuant to other provisions of this Agreement or under applicable law, we may terminate this Agreement, effective upon delivery of notice of termination to you:
(a) if you fail to meet any part of the Development Schedule;
(b) if you or any of your Owners or Affiliates make an unauthorized transfer of the Development Rights;
(c) if you or any of your Owners or Affiliates make any material misstatement or omission in the application for the development rights conferred by this Agreement or in any other information provided to us, or are convicted of, or plead no contest to, a felony or other crime or offense that we reasonably believe may adversely affect the goodwill associated with the Marks;
(d) if you or any of your Owners or Affiliates make any unauthorized use or disclosure of the Confidential Information;
(e) if you or any of your Owners or Affiliates fail to comply with any other provision of this Agreement and do not correct such failure within 30 days after written notice of such failure to comply is delivered to you;
(f) if you or any of your Owners or Affiliates are in breach of any Franchise Agreement or other agreement with us or our Affiliates such that we or our Affiliates have the right to terminate the Franchise Agreement or such other agreement, whether or not we or they elect to exercise such right of termination; or
(g) if we determine that any applicable federal or state legislation, regulation or rule, which is enacted, promulgated or amended after the Effective Date, may have an adverse effect on our rights, remedies or discretion in franchising Restaurants.
We have no obligation whatsoever to refund any portion of the development fee upon any termination, except that we will refund the unapplied portion of the development fee paid pursuant to Section 2.01 in the event of a termination pursuant to Section 8.02(g).
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, 'good cause' for termination includes the franchisee's failure to comply with any lawful provision of the franchise agreement, provided they are given written notice and a reasonable opportunity to correct the failure. While the document specifies that the cure period need not exceed 30 days, the specific length of time considered 'reasonable' can vary.
Additionally, Checkersrallys can terminate the agreement if a franchisee fails to meet any part of the Development Schedule, makes an unauthorized transfer of Development Rights, or makes any material misstatement or omission in the application for development rights. Termination can also occur if the franchisee or their owners are convicted of a felony or other crime that could adversely affect the goodwill associated with Checkersrallys's Marks. Unauthorized use or disclosure of confidential information also constitutes grounds for termination.
Furthermore, Checkersrallys can terminate the agreement if the franchisee breaches any Franchise Agreement or other agreement with Checkersrallys or its Affiliates, giving Checkersrallys the right to terminate, whether or not they choose to exercise that right. Finally, Checkersrallys may terminate the agreement if any applicable federal or state legislation, regulation, or rule enacted, promulgated, or amended after the Effective Date may have an adverse effect on Checkersrallys's rights, remedies, or discretion in franchising Restaurants. It is important to note that Checkersrallys has no obligation to refund any portion of the development fee upon termination, except for the unapplied portion of the development fee paid if the termination occurs due to adverse effects from new legislation or regulations.
It is important for prospective franchisees to understand these conditions, as termination can result in significant financial losses, including the initial franchise fee and potential future profits. Franchisees should seek legal counsel to fully understand their rights and obligations under the franchise agreement and to assess the potential risks associated with these termination clauses.