Does the non-compete agreement for Checkersrallys only preclude direct competition, or does it also preclude indirect competition such as consulting for competitive businesses?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
I acknowledge and understand that the provisions of this Agreement, including my representations, covenants, and warranties (as applicable) given hereunder, are necessary and integral to this Agreement and to Franchisor's and Franchisee's interests under the Franchise Agreement, and are intended to:
- (i) preclude not only direct competition, but also all forms of indirect competition, such as consultation for Competitive Businesses, service as an independent contractor for Competitive Businesses, or any assistance or transmission of information of any kind which would be of any material assistance to a competitor;
- (ii) bind any person or entity having any legal or beneficial interest in me, or traceable to, down or through me, including (without limitation) any of member of my Immediate Family, any direct or indirect beneficiary, any partner (general or limited) or proprietor of mine, and any other such related person or entity, regardless of how many levels or tiers there may be between any such described person or entity and me; and
- (iii) identify for me, toward the goal of preserving through this Agreement, Franchisor's protectable legal interests in the System, customers of Restaurants, the Confidential Information, and the goodwill associated with the Marks.
I also expressly acknowledge my possession of skills and abilities of a general nature, and the opportunity for exploiting such skills in other ways than the operation or involvement in the activities of a Restaurant or a Competitive
Business, so that enforcement of my covenants made in this Agreement will not deprive me of my personal goodwill or ability to earn a living after the effective date of expiration or termination of my relationship with Franchisee, the Franchised Restaurant, or Restaurants generally. If I fail or refuse to abide by any of my foregoing obligations or promises made under this Agreement, and Franchisor or Franchisee obtains enforcement in a judicial or arbitration proceeding, then my obligations and responsibilities specified under the breached covenant will be tolled during the period(s) of time that the covenant is breached and/or Franchisor or Franchisee seeks to enforce it, and will continue for two (2) years starting from the effective date of the order enforcing the covenant.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the non-compete agreement extends beyond just direct competition to include various forms of indirect competition. The agreement is designed to prevent individuals with knowledge of Checkersrallys's systems and confidential information from aiding competitors.
Specifically, the agreement aims to preclude not only direct competition but also all forms of indirect competition, such as consulting for Competitive Businesses, service as an independent contractor for Competitive Businesses, or any assistance or transmission of information of any kind which would be of any material assistance to a competitor. This means that franchisees and certain related parties are restricted from providing services or sharing information that could benefit rival businesses. The agreement also binds any person or entity having any legal or beneficial interest in the franchisee, ensuring a broad scope of coverage.
Checkersrallys also acknowledges that individuals possess general skills and opportunities to earn a living outside of the restaurant industry. The non-compete is designed not to deprive individuals of their ability to earn a living, but rather to protect Checkersrallys's interests in its system, customer base, confidential information, and brand goodwill. If a franchisee breaches the non-compete agreement, the obligations under the covenant will be tolled during the breach and for two years following the enforcement order, highlighting the seriousness of adhering to these restrictions.