If Checkersrallys prevails in a legal proceeding against a franchisee, what costs is the franchisee obligated to reimburse?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
10.04 Costs of Enforcement. If we file a claim in a judicial or arbitration proceeding for amounts you or any of your Owners owe us or any of our Affiliates, or if we enforce this Agreement in a judicial or arbitration proceeding, and we prevail in any such proceeding, you agree to reimburse us for all of our costs and expenses, including reasonable accounting, paralegal, expert witness and attorneys' fees. If we are required to engage legal counsel in connection with your failure to comply with this Agreement, you must reimburse us for any attorneys' fees, costs and expenses we incur.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, if Checkersrallys files a claim against a franchisee or their owners for amounts owed or to enforce the Franchise Agreement, and Checkersrallys prevails, the franchisee must reimburse Checkersrallys for all costs and expenses. These reimbursable costs include reasonable accounting, paralegal, expert witness, and attorneys' fees.
This provision means that a Checkersrallys franchisee could face significant financial burdens beyond the initial dispute if Checkersrallys wins the legal action. The franchisee's responsibility extends to covering Checkersrallys's legal and professional service expenses, which can quickly escalate depending on the complexity and duration of the proceedings. This could create a substantial financial risk for franchisees, especially if the legal battle is protracted or involves multiple expert witnesses.
Many franchise agreements contain clauses requiring the franchisee to cover the franchisor's legal costs if the franchisor prevails in a dispute. This is intended to discourage franchisees from breaching the agreement and to protect the franchisor's interests. However, prospective franchisees should carefully evaluate this provision and understand the potential financial exposure before signing the agreement. It would be prudent to consult with a legal professional to fully understand the implications of this clause and to assess the potential risks involved.