Does the restriction on involvement with a Competitive Business for Checkersrallys franchisees apply only to businesses within a certain geographic area?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
confidentiality agreement), but in no event through any act of mine.
I specifically understand that, without limitation, all the above items, concepts, and/or examples contained in the preceding paragraph constitute Confidential Information of Franchisor, and I will not divert any business to competitors of Franchisee and/or Franchisor. I will at no time copy, duplicate, record or otherwise reproduce any of the Confidential Information or material containing it, in whole or in part, store them in a computer retrieval or database, nor otherwise make the them available to any unauthorized person.
I further agree that, during the term of my employment/service/association or ownership participation, I will not, directly or indirectly, engage or participate in any Competitive Business (defined below in this paragraph), any of which such prohibited behavior I understand and hereby explicitly acknowledge would or could be injurious to, or (in Franchisor's sole judgment) have an adverse effect upon, Franchisor's protectable interests in the Confidential Information, the "Checkers" trademark, or the goodwill and/or reputation of Restaurants generally. I agree that I am prohibited from engaging in any Competitive Business as a proprietor, partner, investor, shareholder, director, officer, employee, principal, agent, advisor, or consultant. For purposes of this Agreement, a "Competitive Business" means any business that: (i) operates as a restaurant or similar food-service provider and derives more than twenty percent (20%) of its revenue from selling hamburgers, cheeseburgers and hot dogs in a fast-food, quick-service, drive-thru or drive-in format; or (ii) grants franchises or licenses to others to operate the type of business specified in the preceding subparagraph (i) (other than a "Checkers" or "Rally's" branded restaurant operated under a franchise agreement with Franchisor).
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to the 2025 Checkersrallys Franchise Disclosure Document, the restriction on involvement with a Competitive Business does not appear to be limited to a specific geographic area. The agreement states that during the term of employment, service, association, or ownership participation, the individual is prohibited from engaging or participating in any Competitive Business, directly or indirectly. A Competitive Business is defined as any business that operates as a restaurant or food-service provider deriving more than 20% of its revenue from selling hamburgers, cheeseburgers, and hot dogs in a fast-food format, or one that grants franchises or licenses to others to operate such a business.
This restriction applies regardless of location, meaning a Checkersrallys franchisee is restricted from involvement in a competitive business anywhere, not just within their protected area. The agreement specifies that this prohibited behavior could be injurious to Checkersrallys' protectable interests in confidential information, the "Checkers" trademark, or the goodwill and reputation of Restaurants generally.
However, there is an exception: an individual may own less than 5% of a Competitive Business if its stock is publicly traded on a recognized United States stock exchange, provided that neither the individual nor the franchisee controls the company. This exception allows for minor investment purposes without granting any control over the competitive entity. The agreement also acknowledges that the individual possesses general skills and abilities that can be exploited in ways other than operating or being involved in a Restaurant or Competitive Business, ensuring that the enforcement of these covenants will not deprive them of their ability to earn a living.