In the Southern Shoals, LLC litigation, why was Checkersrallys initially named as a defendant?

According to Checkersrallys's 2025 Franchise Disclosure Document, in the case of Southern Shoals, LLC v. 2-32C Wheeler Road, Inc. et al., Checkersrallys was initially named as a defendant because Southern Shoals, LLC, the assignee of a Loan and Security Agreement seeking to foreclose on collateral at three franchised Checkersrallys restaurants, incorrectly named Checkersrallys as a defendant.

This type of situation can arise in franchising when a lender attempts to recover assets related to a franchisee's loan default. Because the restaurants in question were Checkersrallys franchises, the plaintiff may have initially believed Checkersrallys itself was directly involved in the loan agreement or owned the collateral. However, the FDD clarifies that Checkersrallys was not the responsible party.

Following being named as a defendant, Checkersrallys filed a cross claim seeking indemnification from the franchisee. This is a standard legal procedure where Checkersrallys sought to hold the franchisee responsible for any losses or liabilities resulting from the lawsuit, as the franchisee's loan default was the root cause of the litigation. This highlights the importance of franchisees meeting their financial obligations to avoid legal issues that could involve the franchisor.