Is a Checkersrallys franchisee required to purchase or lease anything directly from Checkersrallys or its affiliates?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
ESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES**
Generally
To ensure that high and uniform standards of quality and service are maintained, you are required to operate your Franchised Restaurant in strict conformity with our methods, standards and specifications and you are required to purchase goods, services, supplies, fixtures, equipment and inventory only from suppliers we have approved. You are not required to purchase or lease anything from us or any of our affiliates; however, we and our affiliates can be approved suppliers for items. Currently, we are not an approved supplier for any items except that we may from time to time sell used modular restaurants and restaurant equipment to Checkers and Rally's franchisees. We estimate the initial cost of all of required purchases and leases of goods, services, supplies, fixtures, equipment and inventory to be in excess of 95% of your total initial investment (see Item 7). We estimate the ongoing cost of these required purchases and leases to be in excess of 95% of your total ongoing operating expenses.
We may formulate and modify, at our sole discretion, specifications and standards we impose on franchisees and suppliers. Specifications and standards are issued to franchisees through the Operations Manual (defined below) and to suppliers by written notice. The "Operations Manual" is our confidential operations manual, as we may amend at any time, which may consist of one or more manuals or communications, containing our mandatory and suggested standards, specifications and operating procedures relating to the development and operation of Restaurants and other information relating to your obligations as a franchisee and operator of a Restaurant. The term "Operations Manual" also includes all instructions or communications we or our representatives may transmit to you or a substantial number of franchisees, whether in writing or through other media, concerning aspects or modifications to the System, standards, specifications and operating procedures, including bulletins, emails, limited access intranet sites, videotapes, audio tapes, or any other electronic medium. We attempt to negotiate purchase arrangements with suppliers (including price terms) for the benefit of all Restaurants, including those owned by franchisees. We do not provide material benefits (e.g., renewal or additional franchises) to a franchisee based on his use of designated or approved suppliers.
There are no franchisee purchasing or distribution cooperatives.
None of our officers own an interest in any privately-held suppliers, or a material interest in any publicly-held suppliers, of the Checkers or Rally's franchise systems. From time to time, our officers may own non-material interests in publicly-held companies that may be suppliers (or have subsidiaries that may be suppliers) to Restaurants;
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 39–44)
What This Means (2025 FDD)
According to the 2025 Checkersrallys FDD, franchisees are not required to purchase or lease anything directly from Checkersrallys or its affiliates. However, Checkersrallys and its affiliates can be approved suppliers for items. Currently, Checkersrallys is not an approved supplier for any items except that they may from time to time sell used modular restaurants and restaurant equipment to Checkersrallys franchisees. Franchisees are required to purchase goods, services, supplies, fixtures, equipment, and inventory only from suppliers that Checkersrallys has approved.
While franchisees are not required to purchase directly from Checkersrallys, the FDD indicates that Checkersrallys and its affiliates may receive revenues from required purchases and leases of products and services by franchisees. For the fiscal year ended December 30, 2024, Checkersrallys' total revenues were $300,381,238, of which $6,189,551 (2.1%) were revenues from required purchases and leases of products and services by franchisees. This total includes $2,225,520 in gross revenue from subleases with franchisees. Checkersrallys states that their intention is not to earn a profit from these purchases, but instead to use all revenues collected to offset expenses incurred in administering system-wide programs. However, they may earn a profit from franchisees' required purchases and leases of products and services.
Additionally, Checkersrallys' affiliate, CDSI, earned $7,890,469.14 in gross revenue from required purchases and leases of products and services by franchisees during the 2024 fiscal year. Other than CDSI, none of Checkersrallys' affiliates derived any revenue or other material considerations from required franchisee purchases or leases during the fiscal year ended December 30, 2024. This indicates that while direct purchases from Checkersrallys are not mandatory, a significant portion of Checkersrallys' revenue is derived from franchisee purchases through approved suppliers and sublease arrangements, some of which may involve Checkersrallys or its affiliates receiving revenue.