After the Checkersrallys franchise agreement terminates, what is a 'Competitive Business' that franchisees are prohibited from being involved with?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
- 9.02 Post-Term Covenants. For a period of 2 years, starting on the effective date of termination or expiration (without renewal or extension of the Term) of this Agreement, you are prohibited from directly or indirectly (such as through an Immediate Family member) owning a legal or beneficial interest in, or render services or give advice to: (a) any Competitive Business operating within the Development Area; (b) any Competitive Business operating within a radius of three (3) miles of any "Checkers" or "Rally's"-branded restaurant in operation or under construction on the effective date of termination or expiration; or (c) any entity which grants franchises, licenses or other interests to others to operate any Competitive Business. You acknowledge that we have a protectable legal interest in the System, customers of Restaurants and the goodwill associated with the Marks and that the non-competition covenants contained in this Section and Section 6.02 are necessary elements to their protection and are an integral part of this Agreement. You and each of your Owners expressly acknowledge the possession of skills and abilities of a general nature and other opportunities for exploiting such skills, so that enforcement of the covenants contained in this Section will not deprive you of your personal goodwill or ability to earn a living. 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, after the franchise agreement terminates, franchisees are restricted from involvement with a 'Competitive Business' for two years. This includes owning a legal or beneficial interest in, or providing services or advice to, such a business. The restrictions apply to any Competitive Business operating within the Development Area, or within a three-mile radius of any existing or under-construction Checkers or Rally's restaurant at the time of termination or expiration. It also extends to any entity that grants franchises or licenses for operating a Competitive Business.
This post-term covenant aims to protect Checkersrallys's interests in its System, customer base, and the goodwill associated with its trademarks. The franchise agreement emphasizes that these non-competition covenants are essential for safeguarding these interests. Checkersrallys acknowledges that franchisees possess general skills and abilities that allow them to earn a living even with these restrictions in place.
If a franchisee violates these covenants, Checkersrallys can pursue legal or arbitration proceedings to enforce them. In such cases, the obligations under the breached covenant will be suspended during the period of the breach and while Checkersrallys seeks enforcement. The covenant will then remain in effect for two years after the date of the enforcement order. This ensures that Checkersrallys can effectively protect its market position and brand integrity even after a franchise relationship ends.