Is a Checkersrallys franchisee prohibited from issuing securities if it would require compliance with the Securities Exchange Act of 1934?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
13.07 Securities Offerings.Neither you nor any of your Owners may issue or sell, or offer to issue or sell, any of your securities or any securities of any of your Affiliates, regardless of whether such sale or offer would be required to be registered pursuant to the provisions of the Securities Act of 1933, as amended, or the securities laws of any other jurisdiction, without obtaining our prior consent and complying with all of our requirements and restrictions concerning use of information about us and our Affiliates. Under no circumstances may you or any of your Owners issue or sell your securities or the securities of any of your Affiliates, if: (1) such securities would be required to be registered pursuant to the Securities Act of 1933, as amended, or such securities would be owned by more than 35 persons; or (2) after such issuance or sale, you or such Affiliate would be required to comply with the reporting and information requirements of the Securities Exchange Act of 1934, as amended.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, franchisees and their owners face restrictions on issuing or selling securities. Specifically, they need to obtain Checkersrallys's prior consent and adhere to all of Checkersrallys's requirements regarding the use of information about Checkersrallys and its affiliates.
Under no circumstance can a Checkersrallys franchisee or their owners issue or sell securities if those securities would need to be registered under the Securities Act of 1933, or if the securities would be owned by more than 35 people. Furthermore, franchisees and their owners are prohibited from issuing or selling securities if doing so would require them or their affiliates to comply with the reporting and information requirements of the Securities Exchange Act of 1934.
This restriction is significant for prospective Checkersrallys franchisees because it limits their ability to raise capital through the sale of securities. If a franchisee needs additional funding, they would need to explore other options that do not involve issuing securities that trigger registration or reporting requirements. This could include traditional bank loans, private investments that stay within the specified limits, or reinvesting profits back into the business.