Regarding non-compete restrictions for Checkersrallys, does the agreement prevent 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 franchise agreement includes provisions to prevent both direct and indirect competition. Specifically, the agreement aims to preclude not only direct competition but also all forms of indirect competition, such as consulting for competitive businesses or serving as an independent contractor for them. This extends to any assistance or transmission of information that could materially aid a competitor.
This non-compete extends beyond just the franchisee. It also binds any person or entity with a legal or beneficial interest in the franchisee, including family members, beneficiaries, partners, and related entities, regardless of the number of levels or tiers between them and the franchisee. This broad reach is intended to protect Checkersrallys's interests in its system, customers, confidential information, and the goodwill associated with its marks.
The agreement also acknowledges that the franchisee possesses general skills and abilities that can be exploited in ways other than operating or being involved in a Checkersrallys restaurant or a competitive business. This suggests that the enforcement of the non-compete covenants should not deprive the franchisee of their personal goodwill or ability to earn a living after their relationship with Checkersrallys ends. If a franchisee breaches the non-compete obligations, the duration of the restriction will be extended by the period of the breach, plus an additional two years from the date of the enforcement order.