Is there an exception to the Competitive Business definition that allows for investment in publicly traded companies for Checkersrallys?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
Despite the foregoing definition of a Competitive Business, nothing under this Agreement or the Franchise Agreement will prevent Individual from owning for investment purposes less than five percent (5%) of a Competitive Business whose stock or other forms of ownership interest are publicly traded on a recognized United States stock exchange, and so long as neither Individual nor Franchisee controls the company in question.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, there is an exception to the definition of a Competitive Business. An individual is allowed to own less than five percent (5%) of a Competitive Business if its stock or other ownership interests are publicly traded on a recognized United States stock exchange. This exception is valid as long as neither the individual nor the franchisee controls the company in question.
This exception provides some flexibility for franchisees or their owners to invest in publicly traded companies that might technically be considered competitors without violating the franchise agreement. However, the ownership stake must remain below the 5% threshold, and neither the individual nor the franchisee can exert control over the competitive business.
This clause protects Checkersrallys from franchisees gaining significant influence or access to sensitive information within competing businesses, while still allowing for minor investment opportunities in the stock market. It is a fairly standard clause in franchise agreements to prevent conflicts of interest and protect the brand's competitive advantage.