Can a Checkersrallys franchisee perform services for a Competitive Business during the term of the franchise?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
You therefore agree that, during the Term and any successor franchise term, neither you, any of your Owners, nor any of your or your Owners' Immediate Family will (without our prior consent, which consent we may condition or withhold for any or no reason):
(a) have any direct or indirect controlling or non-controlling ownership interest as an owner – whether of record, beneficially, or otherwise – in a Competitive Business, wherever located or operating (except that equity ownership of 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 will not be deemed to violate this subparagraph);
(b) perform services as a director, officer, manager, employee, consultant, representative, or agent for a Competitive Business, wherever located or operating;
(c) divert or attempt to divert any actual or potential business or customer of any Checkers or Rally's-branded restaurant to a Competitive Business; or
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to the 2025 Checkersrallys Franchise Disclosure Document, during the term of the franchise, a franchisee, their owners, or their immediate family members are restricted from performing services for a Competitive Business. Specifically, they cannot act as a director, officer, manager, employee, consultant, representative, or agent for a Competitive Business, regardless of its location. This restriction is in place unless the franchisee obtains prior consent from Checkersrallys, which Checkersrallys may either grant, condition, or withhold at their discretion.
This restriction ensures that franchisees remain fully committed to the Checkersrallys system and do not divert their efforts or expertise to businesses that directly compete with Checkersrallys. A "Competitive Business" is defined as any business that operates as a restaurant or food-service provider deriving 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 business that grants franchises or licenses to others to operate such a business (excluding other Checkers or Rally's franchises).
The in-term covenant is a fairly standard practice in franchising, designed to protect the franchisor's business model, market share, and confidential information. By preventing franchisees from working with competitors, Checkersrallys aims to maintain a competitive edge and ensure that franchisees are focused on growing their Checkersrallys business. Franchisees should carefully consider this restriction and ensure they are willing to commit their full attention to the Checkersrallys franchise during the term of the agreement.
Furthermore, Checkersrallys requires franchisees to ensure that their Operating Partner, and if the franchisee is a business entity, all owners with at least a 10% ownership interest, officers, directors, and managers sign a non-disclosure and non-competition agreement. These agreements must be procured within ten days of the effective date or within ten days of an individual attaining a relevant position, and copies must be provided to Checkersrallys. This requirement extends the scope of the non-compete obligations beyond just the franchisee to include key personnel involved in the operation of the Checkersrallys franchise.