If a Checkersrallys franchisee signs a Franchise Agreement in connection with a Development Agreement, how does this affect the initial franchise fee?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
If you sign the Franchise Agreement in connection with a Development Agreement, then the applicable portion of the development fee you paid under the Development Agreement toward the Franchised Restaurant will be credited against the initial franchise fee payable and due to us under the Franchise Agreement, according to that Development Agreement's terms.
If we agree to grant you development rights, you and we will enter into a Development Agreement, which requires you to pay a development fee of $10,000 per restaurant to be developed.
Under the Development Agreement, you are required to pay the then-current standard initial franchise fee for each Restaurant you are required to develop under a Development Agreement; however, $10,000 of the development fee is credited to the initial franchise fee payable for each Restaurant you are required to open under the Development Agreement until the development fee is credited in full. The development fee is not refundable, in whole or in part, except if we terminate the Development Agreement as a result of adverse franchise legislation. In this event, we will refund the uncredited portion of the development fee.
During our 2024 fiscal year, we did not collect a reduced development fee from any franchisee that signed a Development Agreement.
Source: Item 5 — INITIAL FEES (FDD pages 17–21)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, when a franchisee signs a Franchise Agreement in connection with a Development Agreement, a portion of the development fee paid under the Development Agreement will be credited against the initial franchise fee due under the Franchise Agreement. The standard initial franchise fee is $30,000. The development agreement requires a fee of $10,000 per restaurant to be developed.
Specifically, $10,000 of the development fee is credited towards the initial franchise fee for each restaurant the franchisee is required to open under the Development Agreement until the entire development fee is credited. This means that if a franchisee has paid a development fee, they will receive a reduction in the initial franchise fee for each restaurant they open, up to the total amount of the development fee paid.
It is important to note that the development fee is generally non-refundable, except if Checkersrallys terminates the Development Agreement due to adverse franchise legislation, in which case the uncredited portion of the development fee will be refunded. This arrangement is designed to incentivize and support the franchisee's expansion efforts under the Development Agreement by reducing the upfront costs associated with each new restaurant opening.
During the 2024 fiscal year, Checkersrallys did not collect a reduced development fee from any franchisee that signed a Development Agreement. Prospective franchisees should carefully review the terms of the Development Agreement and Franchise Agreement to understand the specific conditions and requirements for receiving credit for the development fee against the initial franchise fee.