When does Checkersrallys have to defer payment of the development fee and other initial payments owed by Area Franchisee?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
- Development Fee. Section 2.01 of the Agreement shall be amended by adding the following:
Despite the payment provisions above, Franchisor will defer collection of all initial fees owed by Area Franchisee to Franchisor under this Agreement until Franchisor has completed all of its pre-opening obligations under the first franchise agreement entered into pursuant to this Agreement and Area Franchisee has commenced doing business under the first franchise agreement. This deferral requirement has been imposed by the Illinois Attorney General's Office based on the Franchisor's financial condition.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the brand will defer collection of all initial fees owed by an Area Franchisee until Checkersrallys has completed all of its pre-opening obligations under the first franchise agreement entered into pursuant to the Area Franchise Agreement. This deferral extends until the Area Franchisee has commenced business operations under that initial franchise agreement. This policy is specifically applied to Section 2.01 of the Area Franchise Agreement, which concerns the development fee.
This deferral requirement has been imposed by the Illinois Attorney General's Office based on the Franchisor's financial condition. This means that Checkersrallys's financial stability has been reviewed, and this deferral is a condition set to protect franchisees, particularly relevant for agreements governed by Illinois law.
For a prospective Area Franchisee, this deferral provides a significant benefit. It alleviates the upfront financial burden, allowing the franchisee to conserve capital until Checkersrallys has fulfilled its obligations and the first restaurant is ready to open. This can be particularly helpful in managing cash flow during the initial stages of development. However, it is important to note that this deferral is specifically tied to the completion of pre-opening obligations for the first franchise agreement under the Area Franchise Agreement. Subsequent franchise agreements may not be subject to the same deferral terms.
It is important for prospective Area Franchisees to carefully review the specific terms of the Area Franchise Agreement and any state-specific addenda to fully understand the conditions and implications of this deferral. They should also confirm with Checkersrallys whether this deferral policy applies uniformly across all states or if it is subject to change based on regulatory requirements or the franchisor's financial condition.