Is the development fee paid to Checkersrallys refundable?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
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- The development fee shall be Dollars ($ ), representing Ten Thousand Dollars ($10,000) for each Restaurant to be developed pursuant to Section 3(a), above, for which an initial franchise fee is due. The development fee is non-refundable under any circumstances (including your failure to develop any of the Restaurants contemplated hereunder) and shall be deemed earned when paid. For each Franchise Agreement that you enter into in accordance with the development schedule of Section 3(a), above, we will apply Ten Thousand Dollars ($10,000) of the development fee against the initial franchise fee due under the Franchise Agreement until the development fee is applied in full.
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, the development fee is generally non-refundable. Specifically, the development fee is non-refundable under any circumstances, including if the franchisee fails to develop the restaurants as planned. The development fee is considered earned when paid to Checkersrallys. The development fee is calculated as $10,000 for each restaurant to be developed under the agreement. This fee is applied towards the initial franchise fee for each franchise agreement entered into according to the development schedule, until the entire development fee is used.
However, there is one exception where a refund of the unapplied portion of the development fee may be possible. If the Development Agreement is terminated according to Section 8.02(g), Checkersrallys may refund the unapplied portion of the development fee paid under Section 2.01. Section 8.02(g) refers to a termination by Checkersrallys if any new or amended federal or state legislation, regulation, or rule adversely affects Checkersrallys's rights, remedies, or discretion in franchising restaurants.
Prospective franchisees should be aware that the development fee is a sunk cost in most scenarios. It is crucial to carefully consider the development schedule and the likelihood of fulfilling the development obligations before entering into a Development Agreement with Checkersrallys. Understanding the specific conditions under which a refund might be possible, such as termination due to adverse legislative changes, is also important for financial planning and risk assessment.