What does each Owner of a Checkersrallys franchise warrant regarding their ownership interest?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
- 1.03 Your Representations.You, and your Owners, if applicable, represent and warrant to us, that: (a) neither you nor any of your Owners has made any untrue statement of any material fact or has omitted to state any material fact in obtaining the rights granted hereunder; (b) neither you nor any of your Owners has any direct or indirect legal or beneficial interest in any business that may be deemed a
Competitive Business, except as otherwise completely and accurately disclosed in your franchise application submitted to us; and (c) the execution and performance of this Agreement will not violate any other agreement to which you or of any of your Owners may be bound. You recognize that we have approved your franchise application in reliance on all of the statements you and your Owners have made in connection therewith.
- 7.02 In-Term Covenants.You acknowledge that we have granted you the franchise in consideration of, and reliance upon, your agreement to deal exclusively with us. You therefore agree that, during the Term and any successor franchise term, neither you, any of your Owners, nor any of your or your Owners' Immediate Family will (without our prior consent, which consent we may condition or withhold for any or no reason):
- (a) have any direct or indirect controlling or non-controlling ownership interest as an owner – whether of record, beneficially, or otherwise – in a Competitive Business, wherever located or operating (except that equity ownership of less than five percent (5%) of a Competitive Business whose stock or other forms of ownership interest are publicly traded on a recognized United States stock exchange will not be deemed to violate this subparagraph);
- (b) perform services as a director, officer, manager, employee, consultant, representative, or agent for a Competitive Business, wherever located or operating;
- (c) divert or attempt to divert any actual or potential business or customer of any Restaurant to a Competitive Business; or
- (d) engage in any other activity which, in our sole opinion, might be injurious or prejudicial to the goodwill associated with the Marks or the System.
- 7.03 Information Exchange.You must promptly disclose to us all recipes, processes, ideas, concepts, advertising and promotional materials, website pages and content, methods, techniques or materials used or useful to a fast-food restaurant business, whether or not constituting protectable intellectual property, that you create, or that are created on your behalf or for your benefit by your Owners or employees, in connection with the development or operation of your Restaurant (collectively, the "Materials"). Any such Materials will be deemed our sole and exclusive property, part of the System, and works made-for-hire for us. To the extent that any one of the Materials does not qualify as a "work made-for-hire" for us (as such term is defined under Section 101 of the U.S. Copyright Act), by way of this paragraph you irrevocably convey, grant, transfer and assi
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, each Owner must make certain representations and warranties to Checkersrallys regarding their ownership interest. Specifically, Owners warrant that neither they nor the franchisee have made any untrue statement of material fact or omitted any material fact when obtaining franchise rights. They also warrant that they do not have any undisclosed direct or indirect legal or beneficial interest in any business deemed a Competitive Business. Finally, they warrant that executing and performing the Franchise Agreement will not violate any other agreement to which they may be bound. Checkersrallys states that it has approved the franchise application in reliance on all statements made by the franchisee and their Owners.
These warranties are significant because they form the basis of the franchise relationship. If Checkersrallys later discovers that an Owner made a false statement or concealed a conflict of interest, it could potentially terminate the franchise agreement. The definition of "Competitive Business" is broad, so prospective franchisees and their Owners need to carefully review their existing business interests to ensure full disclosure.
Furthermore, Checkersrallys requires franchisees and their Owners to deal exclusively with them during the term of the franchise. Owners cannot have any direct or indirect controlling or non-controlling ownership interest in a Competitive Business, nor can they perform services for one. An exception exists for owning less than 5% of a publicly traded Competitive Business. These in-term covenants are designed to protect Checkersrallys's market share and prevent franchisees from using its confidential information to benefit competitors.
Owners must also agree to disclose all recipes, processes, ideas, advertising and promotional materials, website pages and content, methods, techniques or materials used or useful to a fast-food restaurant business that they create in connection with the operation of their Checkersrallys restaurant. These materials become the sole and exclusive property of Checkersrallys and part of the System. This clause ensures that any innovations or improvements developed by franchisees become part of the Checkersrallys system and can be used by the franchisor and other franchisees.