What is the effect of the Area Franchisee committing an act of default under the Checkersrallys agreement?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
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 commits an act of default that leads to the termination of the Area Franchise Agreement, the Area Franchisee is responsible for paying Checkersrallys all actual, consequential, special, and incidental damages that Checkersrallys incurs as a result of the early termination. This obligation exists regardless of whether these damages were reasonably foreseeable at the time of the default.
The agreement specifies that the Area Franchisee acknowledges and agrees that their act of default is the direct cause of the damages sustained by Checkersrallys, not Checkersrallys's decision to exercise its right to terminate the agreement. This clause is designed to reinforce the Area Franchisee's responsibility for the financial consequences of their default.
However, the document also states that any failure, neglect, or delay by either party to assert a breach or violation of any right related to the agreement does not constitute a waiver of that right, provided that written notice specifying the breach or violation is given to the other party within 12 months of the later of the date of the breach or the date the facts of the breach were discovered (or could have been discovered with reasonable diligence). This provision sets a time limit for Checkersrallys to notify the Area Franchisee of any breaches, which could affect Checkersrallys's ability to claim damages if they delay in providing notice.