If a covenant restricting competitive activity in the Checkersrallys agreement is deemed unenforceable, how will it be handled?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
Every part of this Agreement shall be considered severable. If for any reason any part of this Agreement is held to be invalid, that determination shall not impair the other parts of this Agreement. If any covenant herein which restricts competitive activity is deemed unenforceable by virtue of its scope in terms of geographical area, type of business activity prohibited and/or length of time, but could be
rendered enforceable by reducing any part or all of it, you and we agree that it will be enforced to the fullest extent permissible under applicable law and public policy.
If any applicable law requires a greater prior notice of the termination than is required hereunder, a different standard of "good cause" to terminate this Agreement or the taking of some other action not required hereunder, the prior notice, the "good cause" standard and/or the other action required by such law shall be substituted for the comparable provisions hereof.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the agreement includes a provision for severability and substitution regarding covenants restricting competitive activity. If any covenant restricting competitive activity is deemed unenforceable due to its scope (geographical area, type of business activity, or length of time), Checkersrallys states that the covenant will be enforced to the fullest extent permissible under applicable law and public policy. This means that if a court finds a specific restriction too broad, it will modify the restriction to make it enforceable rather than invalidating it entirely.
This approach is designed to protect Checkersrallys's interests by ensuring that franchisees are restricted from unfairly competing to the greatest extent legally possible. For a prospective franchisee, this means that even if a specific part of the non-compete agreement seems overly restrictive, it could still be enforced in a modified form. Franchisees should be aware that the enforceability of these covenants can vary significantly depending on state laws and judicial interpretations.
This clause also addresses scenarios where applicable laws require greater prior notice of termination or a different standard of "good cause" for termination. In such cases, the terms required by law will be substituted for the comparable provisions in the Checkersrallys agreement. This ensures that the franchise agreement remains compliant with local and federal regulations, providing a degree of legal adaptability.
In practical terms, Checkersrallys aims to maintain the restrictive covenants to the maximum extent allowed by law, which could impact a franchisee's ability to engage in competitive activities during and after the franchise term. Franchisees should seek legal counsel to understand the specific implications of these covenants in their jurisdiction.