Does the Checkersrallys franchise agreement prohibit me from diverting business to competitors of the franchisee or franchisor?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
rmation"). Furthermore, any and all information, knowledge,
know-how, techniques and information which the entities mentioned above or their officers designate as confidential is considered (and hereby acknowledged by me as) Confidential Information for the purposes of this Agreement, except information which I can demonstrate came to my attention before disclosure or which had become or becomes a part of the public domain through publication or communication by others (unless the publication or communication violates a similar confidentiality agreement), but in no event through any act of mine.
I specifically understand that, without limitation, all the above items, concepts, and/or examples contained in the preceding paragraph constitute Confidential Information of Franchisor, and I will not divert any business to competitors of Franchisee and/or Franchisor. I will at no time copy, duplicate, record or otherwise reproduce any of the Confidential Information or material containing it, in whole or in part, store them in a computer retrieval or database, nor otherwise make the them available to any unauthorized person.
I further agree that, during the term of my employment/service/association or ownership participation, I will not, directly or indirectly, engage or participate in any Competitive Business (defined below in this paragraph), any of which such prohibited behavior I understand and hereby explicitly acknowledge would or could be injurious to, or (in Franchisor's sole judgment) have an adverse effect upon, Franchisor's protectable interests in the Confidential Information, the "Checkers" trademark, or the goodwill and/or reputation of Restaurants generally. I agree that I am prohibited from engaging in any Competitive Business as a proprietor, partner, investor, shareholder, director, officer, employee, principal, agent, advisor, or consultant. For purposes of this Agreement, a "Competitive Business" means any business that: (i) operates as a restaurant or similar food-service provider and derives more than twenty percent (20%) of its revenue from selling hamburgers, cheeseburgers and hot dogs in a fast-food, quick-service, drive-thru or drive-in format; or (ii) grants franchises or licenses to others to operate the type of business specified in the preceding subparagraph (i) (other than a "Checkers" or "Rally's" branded restaurant operated under a franchise agreement with Franchisor). Despite the foregoing definition of a Competitive Business, nothing under this Agreement or the Franchise Agreement will prevent Individual from owning for investment purposes less than five percent (5%) of a Competitive Business whose stock or other forms of ownership interest are publicly traded on a recognized United States stock exchange, and so long as neither Individual nor Franchisee controls the company in question.
Upon the expiration or other termination for any reason of my employment, association, service or ownership participation, I agree:
(i) to return immediately to Franchisor or Franchisee, as the case may be, all Confidential Information, and any material(s) containing a subset thereof, in my possession that was utilized, or to which I had access,
- during my employment, association, service or ownership participation;
- (ii) to refrain, beginning upon such expiration or termination and forever thereafter, from any and all contacts with customers of Restaurants for any purpose whatsoever;
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to the 2025 Checkersrallys Franchise Disclosure Document, franchisees are prohibited from diverting business to competitors of either the franchisee or Checkersrallys. The agreement explicitly states that franchisees will not divert any business to competitors. This obligation extends beyond direct competition to include indirect competition, such as consulting for competitive businesses or providing them with any material assistance or information.
The agreement defines a "Competitive Business" as any restaurant or food-service provider that derives more than 20% of its revenue from selling hamburgers, cheeseburgers, and hot dogs in a fast-food, quick-service, drive-thru, or drive-in format, or any entity that franchises or licenses others to operate such a business. However, a franchisee can own less than 5% of a publicly traded Competitive Business for investment purposes, provided they do not control the company.
Checkersrallys emphasizes that violating these non-compete covenants would cause immediate and irreparable harm, allowing Checkersrallys to seek an injunction to prevent any breach. The franchisee also acknowledges that any violation of these terms may be presumed to involve the unlawful use of Checkersrallys' confidential information. This clause ensures that Checkersrallys can protect its market position and confidential information, while franchisees must be aware of these restrictions and their potential legal ramifications.