If a covenant restricting competitive activity in the Checkersrallys franchise agreement is deemed unenforceable, to what extent will it be enforced?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
18.01 Severability and Substitution of Provisions.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.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, if any part of the agreement, including covenants restricting competitive activity, is deemed unenforceable due to its scope, geographical area, type of business activity, or length of time, Checkersrallys and the franchisee agree that it will be enforced to the fullest extent permissible under applicable law and public policy. This means that if a court finds a non-compete clause too broad, it will modify the clause to make it enforceable rather than invalidating it entirely.
This "severability and substitution" clause is fairly standard in franchise agreements. It aims to protect the overall agreement by ensuring that if one provision is found invalid, the rest of the contract remains in effect. In the context of non-compete agreements, this clause allows a court to narrow the scope of the restriction (e.g., reduce the geographic area or the duration of the restriction) to make it reasonable and enforceable.
For a prospective Checkersrallys franchisee, this means that even if a non-compete clause seems overly broad, it is likely to be enforced to some degree. Franchisees should be aware of this and understand that they may be restricted from engaging in competitive activities, even if the initial terms of the non-compete are modified by a court. It is advisable to seek legal counsel to fully understand the implications of these clauses under the specific laws of their state.