If a franchisee violates the non-compete covenants in the Checkersrallys franchise agreement, does the agreement state that it may be presumed the violation was accomplished through unlawful utilization of the Franchisor's Confidential Information?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
I acknowledge that violation of the covenants not to compete contained in this Agreement would result in immediate and irreparable injury to Franchisor and Franchisee, for which no adequate remedy at law will be available. Accordingly, I hereby consent to the entry of an injunction procured by Franchisor or Franchisee (or both), in any appropriate jurisdiction and venue (notwithstanding other references to resolution of actions exclusively in Franchisor's home prohibiting any conduct by me in violation of the terms of those covenants not to compete and/or restrictions on the use of Confidential Information under this Agreement. I expressly agree that it may conclusively be presumed in any legal action that any violation of the terms of these covenants not to compete was accomplished by and through my unlawful utilization of Franchisor's Confidential Information. Further, I expressly agree that any claims I may have against Franchisor will not constitute a defense to Franchisor's enforcement of the covenants not to compete under this Agreement. I further agree to pay all costs and expenses (including reasonable attorneys' and experts' fees) incurred by Franchisor in connection with the enforcement of those covenants not to compete set forth in this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the franchise agreement includes a clause addressing violations of non-compete covenants. It states that any violation of these covenants can be presumed to have been achieved through the franchisee's unlawful use of Checkersrallys's confidential information. This agreement is designed to protect Checkersrallys from unfair competition and the misuse of its proprietary information.
This clause has significant implications for a prospective Checkersrallys franchisee. If a franchisee is found to be in violation of the non-compete agreement, Checkersrallys can pursue legal action, and the franchisee expressly agrees that it may conclusively be presumed in any legal action that any violation of the terms of these covenants not to compete was accomplished by and through my unlawful utilization of Franchisor's Confidential Information. This presumption can make it more difficult for the franchisee to defend against such claims, as the burden of proof may shift to them to demonstrate that they did not use confidential information.
Furthermore, the franchisee agrees that any claims they may have against Checkersrallys will not serve as a defense against the enforcement of the non-compete covenants. The franchisee is also responsible for covering all costs and expenses, including attorney and expert fees, that Checkersrallys incurs while enforcing these covenants. This could create a substantial financial burden for a franchisee found in violation.
This type of clause is relatively common in franchise agreements, as franchisors seek to protect their business systems and trade secrets. Prospective franchisees should carefully review these non-compete provisions and understand the potential consequences of violating them. It is advisable to seek legal counsel to fully understand the implications of these clauses before signing the franchise agreement.