After termination or expiration of the Checkersrallys franchise agreement, are franchisees prohibited from owning an interest in an entity that grants franchises for a Competitive Business?
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, for a period of two years after the termination or expiration of the franchise agreement, franchisees are restricted from certain activities related to competitive businesses. Specifically, this restriction begins on the effective date of termination or expiration, without any renewal or extension of the term.
The franchisee is prohibited from directly or indirectly owning a legal or beneficial interest in, or rendering services or giving advice to any entity that grants franchises, licenses, or other interests to others to operate any Competitive Business. This includes actions taken through an Immediate Family member.
Checkersrallys emphasizes that it has a protectable legal interest in its System, customers, and the goodwill associated with its Marks. The non-competition covenants are deemed necessary for the protection of these interests and are an integral part of the franchise agreement. Checkersrallys also states that franchisees acknowledge their general skills and abilities and other opportunities for exploiting such skills, so that enforcement of these covenants will not deprive them of their personal goodwill or ability to earn a living. If a franchisee fails to comply with these covenants, and Checkersrallys pursues enforcement through legal proceedings, the obligations under the breached covenant will be tolled during the period of the breach and/or enforcement efforts, and will continue for two years after the date of the enforcement order.