Under what condition can Checkersrallys require a franchisee to execute a lease for the Restaurant Location upon termination or expiration of the Franchise Agreement?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
16.05 Right to Lease Real Estate.
- (a) Upon termination of this Agreement (for any reason, no reason, or upon expiration without renewal), if you or any of your Owners or Affiliates directly or indirectly owns the building and/or land (the "Real Estate") on which the Franchised Restaurant is located, we may, and at our option (in our sole discretion) and in conjunction with our purchase of the Franchised Restaurant pursuant to Section 16.04 hereof, require you to execute and deliver to us or our designee a lease for the Restaurant Location pursuant to the terms of Section 16.05(b).
- (b) If we elect to require you to execute and deliver to us or our designee a lease for the Restaurant Location, we shall deliver written notice to you within ten (10) days after the effective date of termination or expiration of this Agreement of such election. Following such notice, you and we shall negotiate in good faith a lease for the Real Estate containing commercially reasonable terms with a term equal to a minimum of the remaining Term under this Agreement. If you and we have not agreed to a lease within thirty (30) days after your receipt of our election, we shall engage a Real Estate Appraiser to prepare a lease with commercially reasonable terms. The Real Estate Appraiser's determination will be binding, and you must
execute and deliver to us a lease for the Restaurant Location containing the commercially reasonable terms provided by the Real Estate Appraiser. All fees, compensation and cost and expense reimbursements of the Real Estate Appraiser shall be borne equally by the parties. Upon your execution of the lease for the Restaurant Location, you agree to vacate the Restaurant Location promptly and completely, rendering all necessary assistance to us to enable us to take prompt possession.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, Checkersrallys has the option to require a franchisee to execute a lease for the restaurant location under specific circumstances related to property ownership and the termination or expiration of the franchise agreement. This condition arises if the franchisee, or any of their owners or affiliates, directly or indirectly owns the building and/or land (referred to as the "Real Estate") where the franchised restaurant is located. This condition is tied to Checkersrallys's potential purchase of the franchised restaurant upon termination or expiration of the agreement.
If Checkersrallys chooses to exercise this option, they must provide written notice to the franchisee within ten days after the termination or expiration date of the Franchise Agreement. Following this notice, both parties are expected to negotiate in good faith to establish a lease for the real estate. The lease terms should be commercially reasonable, with a term length equivalent to the remaining term of the original Franchise Agreement.
In the event that Checkersrallys and the franchisee cannot reach an agreement on the lease terms within thirty days of the franchisee receiving Checkersrallys's election notice, a Real Estate Appraiser will be engaged to determine commercially reasonable terms for the lease. The determination made by the Real Estate Appraiser will be binding on both parties, and the franchisee is obligated to execute and deliver a lease to Checkersrallys based on those terms. The costs associated with the Real Estate Appraiser, including fees, compensation, and expense reimbursements, will be shared equally between Checkersrallys and the franchisee. Upon executing the lease, the franchisee must promptly vacate the restaurant location and provide necessary assistance to allow Checkersrallys to take possession.