Under what conditions can Checkersrallys Development Rights be transferred?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
- (a) Before employment or any promotion, your Operating Partner; and,
- (b) If you are a business entity, all Owners with at least a ten percent (10%) direct or indirect legal or beneficial ownership interest in you; all of your officers, directors and managers; and, all persons possessing equivalent positions in any business entity which directly or indirectly owns and/or controls you. You shall procure all such Nondisclosure and
Non-Competition Agreements no later than ten (10) days following the Effective Date (or, if any individual or entity attains any status identified above after the Effective Date, within ten (10) days after such individual or entity's attains such status) and shall furnish to us copies of all executed Nondisclosure and Non-Competition Agreements within ten (10) days following their execution.
7. AREA FRANCHISEE'S RIGHT TO TRANSFER.
- 7.01 Franchisor's Approval. Your rights and duties under this Agreement are personal to you and if you are a business corporation, partnership, limited liability company or any other legal entity, your Owners. Accordingly, neither you nor any of your Owners may Transfer the Development Rights without our prior approval and without complying with the terms and conditions of Section 7. Any transfer without such approval or compliance constitutes a breach of this Agreement and is void and of no force or effect.
- 7.02 Conditions for Approval. If we have not exercised our right of first refusal under Section 7.06, we will not unreasonably withhold our approval of a Transfer of the Development Rights that meets all of the reasonable restrictions, requirements and conditions we impose on the transfer, the transferor(s) and/or the transferee(s), including the following:
- (a) You and your Owners and Affiliates must be in compliance with the provisions of this Agreement and all Franchise Agreements executed pursuant hereto;
- (b) at the time of the proposed Transfer, you have opened and continue to operate at least one (1) Restaurant;
- (c) the proposed transferee and its owners (if the proposed transferee is a corporation, partnership, limited liability company or other legal entity) must provide us on a timely basis all information we request, and must be individuals acting in their individual capacities who are of good character and reputation, who must have sufficient business and development experience, aptitude and financial resources to develop Restaurants pursuant to this Agreement, and who must otherwise meet our approval;
- (d) the proposed transferee may not be an entity, or be affiliated with an entity, that is required to comply with the reporting and information requirements of the Securities Exchange Act of 1934, as amended;
- (e) the transferee and its owners must agree to be bound by all of the provisions of this Agreement for the remainder of its term;
- (f) the transferee must acquire, in a concurrent transaction, all of your rights and the rights of your Owners and Affiliates under all franchise agreements for Restaurants executed by your or your Owners or Affiliates pursuant to this Agreement or pursuant to any other development or similar agreement with us;
- (g) You or the transferee must pay us a transfer fee equal to $20,000;
- (h) You and your Owners and Affiliates must, except to the extent limited or prohibited by applicable law, execute a general release, in form and substance satisfactory to
us, of any and all claims against us, our Affiliates and stockholders, officers, directors, employees, agents, successors and assigns;
- (i) you (and your Immediate Family) will not, for two (2) years beginning on the transfer's effective date, engage in any of the activities proscribed in Section 9.02 below;
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the Development Rights under the Area Franchise Agreement are personal to the franchisee and their owners. Therefore, neither the franchisee nor their owners can transfer these rights without prior approval from Checkersrallys and compliance with specific terms and conditions. Transferring the Development Rights without approval or compliance constitutes a breach of the Area Franchise Agreement and is considered void.
Checkersrallys will not unreasonably withhold approval of a transfer if the transfer meets certain requirements. These conditions include that the franchisee and their owners must be in compliance with the Area Franchise Agreement and all related Franchise Agreements, and the franchisee must have opened and be operating at least one restaurant at the time of the proposed transfer. The proposed transferee must provide all requested information, demonstrate good character, possess sufficient business and development experience, and have the financial resources to develop restaurants. The transferee cannot be an entity required to comply with the reporting requirements of the Securities Exchange Act of 1934.
Additional conditions for transfer approval include the transferee agreeing to be bound by all provisions of the Area Franchise Agreement for the remainder of its term and acquiring all rights under franchise agreements for restaurants executed by the franchisee. A transfer fee of $20,000 must be paid to Checkersrallys by either the franchisee or the transferee. The franchisee and their owners must execute a general release of any claims against Checkersrallys and its affiliates. Furthermore, for two years following the transfer, the franchisee and their immediate family cannot engage in activities proscribed in Section 9.02 of the agreement. Both the franchisee and their owners must also execute any other documents reasonably required by Checkersrallys to protect its rights under the Area Franchise Agreement and any Franchise Agreements.
Checkersrallys also has a right of first refusal. If the franchisee desires to transfer the Development Rights for legal consideration, they must obtain a bona fide, executed written offer with an earnest money deposit of at least 5% of the offering price from a responsible purchaser and provide a copy of the offer to Checkersrallys. Checkersrallys can then choose to purchase the interest in the Area Franchise Agreement at the same price and terms. If Checkersrallys does not exercise this option, the franchisee can proceed with the sale to the offeror, subject to final approval of the transfer.