What is the effect of the Area Franchisee acknowledging and agreeing that the proximate cause of damages sustained by the Franchisor is the Area Franchisee's act of default in the Checkersrallys agreement?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
10.03 Exercise of Rights of Parties. The rights of Franchisor and Area Franchisee hereunder are cumulative and no exercise or enforcement by Franchisor or Area Franchisee of any right or remedy hereunder shall preclude the exercise or enforcement by Franchisor or Area Franchisee of any other right or remedy hereunder which Franchisor or Area Franchisee is entitled to enforce by law. If Area Franchisee commits any act of default under this Agreement for which Franchisor exercises its right to terminate this Agreement, Area Franchisee shall pay to Franchisor all actual, consequential, special and incidental damages Franchisor incurs as a result of the premature termination of this Agreement regardless of whether or not such damages are reasonably foreseeable. Area Franchisee acknowledges and agrees that the proximate cause of such damages sustained by Franchisor is Area Franchisee's act of default and not Franchisor's exercise of its right to terminate. Notwithstanding the foregoing, and except as otherwise prohibited or limited by applicable law, any failure, neglect, or delay of a party to assert any breach or violation of any legal or equitable right arising from or in connection with this Agreement, shall constitute a waiver of such right and shall preclude the exercise or enforcement of any legal or equitable remedy arising therefrom, unless written notice specifying such breach or violation is provided to the other party within 12 months after the later of: (a) the date of such breach or violation; or (b) the date of discovery of the facts (or the date the facts could have been discovered, using reasonable diligence) giving rise to such breach or violation.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, if an Area Franchisee defaults on their agreement, leading Checkersrallys to terminate the agreement, the Area Franchisee is responsible for covering all damages Checkersrallys incurs due to the early termination. This includes actual, consequential, special, and incidental damages, regardless of whether these damages were reasonably foreseeable.
The agreement stipulates that the Area Franchisee's act of default, rather than Checkersrallys's decision to terminate the agreement, is the direct cause of these damages. This acknowledgement is significant because it potentially limits the Area Franchisee's ability to dispute the cause of the damages in legal proceedings.
However, the document also states that Checkersrallys's failure to promptly address any breach or violation of rights under the agreement could be considered a waiver of those rights, unless written notice is provided within 12 months of the breach or discovery of the facts. This clause provides some protection to the Area Franchisee, as Checkersrallys cannot delay in asserting their rights without potentially losing them.