Can Checkersrallys terminate the agreement if a franchisee is in breach of another agreement with Checkersrallys or its affiliates?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
of notice of termination to you:
- (a) if you fail to meet any part of the Development Schedule;
- (b) if you or any of your Owners or Affiliates make an unauthorized transfer of the Development Rights;
- (c) if you or any of your Owners or Affiliates make any material misstatement or omission in the application for the development rights conferred by this Agreement or in any other information provided to us, or are convicted of, or plead no contest to, a felony or other crime or offense that we reasonably believe may adversely affect the goodwill associated with the Marks;
- (d) if you or any of your Owners or Affiliates make any unauthorized use or disclosure of the Confidential Information;
- (e) if you or any of your Owners or Affiliates fail to comply with any other provision of this Agreement and do not correct such failure within 30 days after written notice of such failure to comply is delivered to you;
- (f) if you or any of your Owners or Affiliates are in breach of any Franchise Agreement or other agreement with us or our Affiliates such that we or our Affiliates have the right to terminate the Franchise Agreement or such other agreement, whether or not we or they elect to exercise such right of termination;
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, Checkersrallys has the right to terminate the agreement if a franchisee, their owners, or their affiliates breach any other agreement with Checkersrallys or its affiliates. This is irrespective of whether Checkersrallys or its affiliates choose to actually exercise their termination rights under that other agreement. This provision ensures that all agreements between the parties are interconnected, and a breach in one can trigger consequences in others.
This cross-default clause means that franchisees must maintain compliance across all agreements they have with Checkersrallys and its affiliates. A failure to comply with one agreement can lead to the termination of the franchise agreement, even if Checkersrallys doesn't terminate the initial agreement that was breached. This could include loan agreements, supply agreements, or other franchise agreements.
Checkersrallys also considers any default or breach by the franchisee (or their owners) or their affiliate (or any of their owner's affiliates) of any other agreement with Checkersrallys or its affiliate as an event of default under the franchise agreement. Conversely, any default or breach by the franchisee (or any of their owners) of the franchise agreement will be considered an event of default or breach by the franchisee under any and all agreements between Checkersrallys or its affiliate and the franchisee (or any of their owners) or the franchisee's affiliate (or any of their owner's affiliates).
This cross-default provision is a significant consideration for prospective Checkersrallys franchisees. It highlights the importance of carefully reviewing and adhering to all agreements with Checkersrallys and its affiliates to avoid potential termination of the franchise agreement due to a breach in a separate agreement.