What happens to the goodwill established by a Checkersrallys franchisee's use of the Marks?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
- 5.01 Ownership of the Marks.You acknowledge that we own the Marks. Your right to use the Marks is derived solely from this Agreement and is limited to conducting business pursuant to and in compliance with this Agreement. Your unauthorized use of any of the Marks constitutes a breach of this Agreement and an infringement of our rights to the Marks. This Agreement does not confer on you any goodwill or other interests in the Marks. Your use of the Marks and any goodwill established thereby inures to our exclusive benefit. All provisions of this Agreement applicable to the Marks apply to any additional or substitute trademarks, service marks and trade dress we authorize you to use. You may not at any time during or after the Term contest, or assist any other person in contesting, the validity or ownership of any of the Marks.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, Checkersrallys owns the Marks, and the franchisee's right to use them comes solely from the Franchise Agreement. The agreement does not confer any goodwill or other interests in the Marks to the franchisee. Any goodwill established through the franchisee's use of the Marks inures to the exclusive benefit of Checkersrallys. This means that while a franchisee's successful operation may increase brand recognition and positive reputation in their area, the resulting goodwill belongs to Checkersrallys, not the franchisee.
This has significant implications for a prospective Checkersrallys franchisee. Upon termination or expiration of the franchise agreement, the franchisee cannot claim any ownership or benefit from the goodwill they helped create. Checkersrallys retains the right to continue using the Marks and benefit from the established reputation, even if the franchisee's efforts contributed to it. This is a common practice in franchising, as the brand and its associated Marks are the franchisor's intellectual property.
Furthermore, the franchisee is prohibited from contesting the validity or ownership of the Marks during or after the term of the agreement. This reinforces Checkersrallys's exclusive ownership and control over its brand identity. The franchisee's investment in building the business under the Checkersrallys name ultimately benefits the franchisor's brand equity, with no residual rights accruing to the franchisee.