What specific aspect of the covenant not to compete in the Checkersrallys Franchise Agreement and Development Agreement might be unenforceable in California?

According to Checkersrallys's 2025 Franchise Disclosure Document, a specific aspect of the covenant not to compete in the Franchise Agreement and Development Agreement may not be enforceable under California law. The document states that the agreements contain "a covenant not to compete that extends beyond the termination of the franchise."

In California, covenants not to compete are generally unenforceable, especially those that extend beyond the termination of the franchise agreement. This is because California law prioritizes an individual's right to pursue a livelihood and restricts agreements that restrain trade. The Checkersrallys FDD explicitly acknowledges this potential issue.

Prospective franchisees in California should be aware that while Checkersrallys includes a post-term non-compete clause in its agreements, this clause might not be legally binding in California. Franchisees should seek legal counsel to understand their rights and obligations under California law, particularly regarding non-compete agreements. It is important to note that the enforceability of such clauses can depend on specific circumstances and legal interpretations at the time.