Does the Checkersrallys cross-default clause apply to the franchisee's Owners and their Affiliates?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
- 14.03 Cross-Default.
Any default or breach by you (or any of your Owners) or your Affiliate (or any of your Owner's Affiliates) of any other agreement with us or our Affiliate will be considered an event of default under this Agreement, and any default or breach by you (or any of your Owners) of this Agreement will be considered an event of default or breach by you under any and all agreements between us or our Affiliate and you (or any of your Owners) or your Affiliate (or any of your Owner's Affiliates).
If the nature of the default under any other agreement would have been considered an event of default under this Agreement, then we or our Affiliate will have the right to terminate all other agreements between us or our Affiliate and you (or any of your Owners) or your Affiliate (or any of your Owner's Affiliates) in accordance with the termination provisions of this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the cross-default clause does indeed apply to the franchisee, their owners, and their affiliates. Specifically, any default or breach by the franchisee (or their owners) or their affiliate (or any of their owner's affiliates) of any agreement with Checkersrallys or its affiliates will be considered an event of default under the Franchise Agreement.
Conversely, any default or breach by the franchisee (or any of their owners) of the Franchise Agreement will be considered an event of default or breach by the franchisee under any and all agreements between Checkersrallys or its affiliates and the franchisee (or any of their owners) or their affiliate (or any of their owner's affiliates). This creates a broad interconnectedness between all agreements involving the franchisee, their owners, and their affiliates with Checkersrallys.
This cross-default provision has significant implications for a prospective Checkersrallys franchisee. It means that a default in one agreement can trigger defaults in all other agreements, potentially leading to the termination of multiple agreements and significant financial repercussions. For example, if a franchisee's affiliate defaults on a supply agreement with Checkersrallys, this could trigger a default under the franchisee's Franchise Agreement, even if the franchisee is fully compliant with that agreement.
Furthermore, if the nature of the default under any other agreement would have been considered an event of default under the Franchise Agreement, Checkersrallys or its affiliate has the right to terminate all other agreements between them and the franchisee (or any of their owners) or their affiliate (or any of their owner's affiliates). This provision underscores the importance of ensuring that all parties related to the franchisee maintain compliance with all agreements involving Checkersrallys to avoid triggering a cross-default event.