What is the effect of Checkersrallys enforcing the agreement in a judicial or arbitration proceeding?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
10.04 Costs of Enforcement. If we file a claim in a judicial or arbitration proceeding for amounts you or any of your Owners owe us or any of our Affiliates, or if we enforce this Agreement in a judicial or arbitration proceeding, and we prevail in any such proceeding, you agree to reimburse us for all of our costs and expenses, including reasonable accounting, paralegal, expert witness and attorneys' fees. If we are required to engage legal counsel in connection with your failure to comply with this Agreement, you must reimburse us for any attorneys' fees, costs and expenses we incur.
If you fail or refuse to abide by any of the foregoing covenants, and we obtain enforcement in a judicial or arbitration proceeding, the obligations under the breached covenant will be tolled during the period(s) of time that the covenant is breached and/or we seek to enforce it, and will continue in effect for a period of 2 years after the date of order enforcing the covenant.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, if Checkersrallys files a claim against a franchisee or their owners in a judicial or arbitration proceeding and prevails, the franchisee must reimburse Checkersrallys for all costs and expenses. These costs include reasonable accounting, paralegal, expert witness, and attorneys' fees. Additionally, if Checkersrallys needs to engage legal counsel due to a franchisee's failure to comply with the agreement, the franchisee is responsible for reimbursing Checkersrallys for all attorneys' fees, costs, and expenses incurred.
Furthermore, if a franchisee fails to abide by non-competition covenants and Checkersrallys seeks enforcement in a judicial or arbitration proceeding, the obligations under the breached covenant will be tolled during the period of the breach and enforcement efforts. The covenant will then remain in effect for two years after the date of the order enforcing the covenant. This means that the non-compete period can be extended if the franchisee violates the agreement and Checkersrallys has to take legal action to enforce it.
These provisions highlight the financial risks for a Checkersrallys franchisee who does not comply with the franchise agreement. The franchisee could be responsible for covering Checkersrallys's legal costs in addition to their own, which can be substantial. The extension of the non-compete period also restricts the franchisee's ability to engage in competitive business activities for a longer duration if they breach the agreement and Checkersrallys pursues legal enforcement.