After termination of employment, service, association, or ownership participation, what am I prohibited from doing regarding Competitive Businesses with Checkersrallys?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
Upon the expiration or other termination for any reason of my employment, association, service or ownership participation, I agree:
(i) to return immediately to Franchisor or Franchisee, as the case may be, all Confidential Information, and any material(s) containing a subset thereof, in my possession that was utilized, or to which I had access,
- during my employment, association, service or ownership participation;
- (ii) to refrain, beginning upon such expiration or termination and forever thereafter, from any and all contacts with customers of Restaurants for any purpose whatsoever; and
- (iii) for a period of two (2) years, starting on the effective date of termination or expiration of my employment/service/association or ownership participation, to refrain from directly or indirectly (such as through any one or more of my spouse, legally-recognized domestic partner, parents, children or sibling(s) (collectively, "Immediate Family")) owning a legal or beneficial interest in, or render services or give advice to: (a) any Competitive Business operating at the Premises or within a three (3)-mile radius of the Premises; (b) any Competitive Business operating within a radius of three (3) miles of any Restaurant in operation or under construction on the effective date of termination or expiration of my employment/service/association/ ownership participation; or (c) any entity which grants franchises, licenses or other interests to others to operate any Competitive Business.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, after the termination of employment, service, association, or ownership participation, you are subject to certain restrictions regarding competitive businesses. For a period of two years, you are prohibited from directly or indirectly owning a legal or beneficial interest in, or rendering services or giving advice to, a Competitive Business. This restriction applies to Competitive Businesses operating at the Premises or within a three-mile radius of the Premises, as well as those operating within a three-mile radius of any Checkersrallys restaurant in operation or under construction on the date of termination. This also extends to any entity that grants franchises, licenses, or other interests to others to operate any Competitive Business.
These restrictions also apply to actions taken through immediate family members, including spouses, legally recognized domestic partners, parents, children, or siblings. The document defines a "Competitive Business" as any business that operates as a restaurant or similar food-service provider deriving more than 20% of its revenue from selling hamburgers, cheeseburgers, and hot dogs in a fast-food, quick-service, drive-thru, or drive-in format, or any business that grants franchises or licenses to others to operate such a business.
The Checkersrallys FDD states that these covenants are necessary to protect Checkersrallys's legal interests in its system, customers, confidential information, and the goodwill associated with its marks. The agreement acknowledges that individuals possess general skills and abilities that can be exploited in other ways, ensuring that the enforcement of these covenants does not deprive them of their personal goodwill or ability to earn a living after their relationship with Checkersrallys ends. If a franchisee fails to comply with these obligations, the restricted period will be tolled during the breach and continue for two years from the date of the enforcement order.
These post-term covenants are fairly standard in the franchise industry to protect the brand and prevent franchisees or employees from using insider knowledge to compete unfairly. Prospective franchisees should carefully consider these restrictions and how they might impact their future career options before investing in a Checkersrallys franchise.