Who is jointly and severally liable for the Early Termination Damages owed to Checkersrallys?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
If we terminate this Agreement as a result of your breach, you and we agree that the amount of damages which we would incur for any such early termination would be difficult, if not impossible, to accurately ascertain. Accordingly, within 30 days following such termination, you shall pay us an amount equal to the average monthly royalty fees and advertising contributions that you owed to us for the past 24 months multiplied by the number of months remaining in the Term ("Early Termination Damages"). If you have not operated the Franchised Restaurant for 24 months prior to the termination of this Agreement, the Early Termination Damages will be calculated by using the average monthly royalties and advertising contributions you owed for the number of months that the Franchised Restaurant operated multiplied by the number of months remaining in the Term. These Early Termination Damages shall constitute liquidated damages and are not to be construed as a penalty and shall be the joint and several liability of you and each of your Owners who personally guarantees your obligations under this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, in the event of early termination of the franchise agreement due to the franchisee's breach, both the franchisee and any owners who have personally guaranteed the franchisee's obligations are jointly and severally liable for the Early Termination Damages. These damages are calculated to compensate Checkersrallys for the losses incurred due to the premature termination.
The Early Termination Damages are defined as the average monthly royalty fees and advertising contributions owed to Checkersrallys for the past 24 months, multiplied by the number of months remaining in the franchise term. If the franchise has been operating for less than 24 months, the calculation uses the average monthly royalties and advertising contributions for the actual number of months the restaurant has been in operation. This amount represents liquidated damages and is not considered a penalty.
This joint and several liability means that Checkersrallys can pursue either the franchisee or the personal guarantors (or both) for the full amount of the Early Termination Damages. Personal guarantees are a common practice in franchising, especially for new or smaller franchisees, as they provide the franchisor with additional security. Prospective Checkersrallys franchisees should carefully consider the implications of providing a personal guarantee, as it puts their personal assets at risk if the franchise fails and the agreement is terminated early.