What stipulations exist regarding post-term covenants for Checkersrallys franchisees after the termination of their franchise agreement?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
- 9.02 Post-Term Covenants. For a period of 2 years, starting on the effective date of termination or expiration (without renewal or extension of the Term) of this Agreement, you are prohibited from directly or indirectly (such as through an Immediate Family member) owning a legal or beneficial interest in, or render services or give advice to: (a) any Competitive Business operating within the Development Area; (b) any Competitive Business operating within a radius of three (3) miles of any "Checkers" or "Rally's"-branded restaurant in operation or under construction on the effective date of termination or expiration; or (c) any entity which grants franchises, licenses or other interests to others to operate any Competitive Business. You acknowledge that we have a protectable legal interest in the System, customers of Restaurants and the goodwill associated with the Marks and that the non-competition covenants contained in this Section and Section 6.02 are necessary elements to their protection and are an integral part of this Agreement. You and each of your Owners expressly acknowledge the possession of skills and abilities of a general nature and other opportunities for exploiting such skills, so that enforcement of the covenants contained in this Section will not deprive you of your personal goodwill or ability to earn a living. If you fail or refuse to abide by any of the foregoing covenants, and we obtain enforcement in a judicial or arbitration proceeding, the obligations under the breached covenant will be tolled during the period(s) of time that the covenant is breached and/or we seek to enforce it, and will continue in effect for a period of 2 years after the date of order enforcing the covenant.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, franchisees are subject to post-term covenants for a period of two years following the termination or expiration of their franchise agreement. These covenants restrict franchisees from engaging in competitive business activities within specific geographic areas.
Specifically, franchisees are prohibited from directly or indirectly owning or operating a Competitive Business within their Development Area. They are also restricted from involvement with a Competitive Business operating within a three-mile radius of any Checkers or Rally's restaurant that is in operation or under construction at the time of termination or expiration. Furthermore, franchisees cannot be involved with any entity that grants franchises or licenses for a Competitive Business.
The FDD states that Checkersrallys has a protectable legal interest in its system, customer base, and the goodwill associated with its trademarks. The non-competition covenants are deemed necessary to protect these interests and are an integral part of the franchise agreement. The document also states that enforcement of these covenants will not deprive franchisees of their ability to earn a living, acknowledging their general skills and abilities. If a franchisee breaches these covenants, the obligations will be tolled during the period of the breach and any enforcement efforts, and will continue for two years after the enforcement order.