If the Checkersrallys franchisee is a legal entity, what obligation do the owners have?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
If you are a corporation, limited liability company, partnership or any other type of legal entity, the provisions of the Franchise Agreement (and, if applicable, the Development Agreement) also apply to your owners by virtue of the requirement that all your owners personally guarantee, and be personally bound by, your obligations under the Franchise Agreement (or, if applicable, the Development Agreement).
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 64–65)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, if a franchisee is a legal entity such as a corporation, limited liability company, or partnership, the owners are required to personally guarantee the franchisee's obligations under the Franchise Agreement or Development Agreement. This means that the owners are personally bound by the terms and conditions of these agreements.
This requirement has significant implications for prospective Checkersrallys franchisees who choose to operate under a legal entity. By personally guaranteeing the obligations, the owners are putting their personal assets at risk if the franchise fails to meet its financial or contractual responsibilities. This is a common practice in franchising, as it provides the franchisor with an additional layer of security and ensures that the owners are fully committed to the success of the franchise.
Furthermore, Checkersrallys also requires that owners with at least a ten percent (10%) direct or indirect legal or beneficial ownership interest in the franchisee entity execute a non-disclosure and non-competition agreement. This agreement must be obtained before employment or any promotion. The franchisee must furnish copies of all executed Nondisclosure and Non-Competition Agreements to Checkersrallys within ten (10) days following their execution. This ensures that the owners are legally bound to protect Checkersrallys's confidential information and refrain from engaging in competitive activities, even after they are no longer involved with the franchise.
In addition, the rights and duties under the Franchise Agreement are personal to the franchisee and, if the franchisee is a business entity, its owners. This means that neither the franchisee nor any of its owners may transfer the Development Rights without Checkersrallys's prior approval and compliance with the terms and conditions outlined in the agreement. Any transfer without such approval constitutes a breach of the agreement and is considered void.