Under the Checkersrallys franchise agreement, what is the effect of a default by the franchisee on other agreements between the franchisee and the franchisor?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
The rights of Franchisor and Franchisee hereunder are cumulative and no exercise or enforcement by Franchisor or Franchisee of any right or remedy hereunder shall preclude the exercise or enforcement by Franchisor or Franchisee of any other right or remedy hereunder which Franchisor or Franchisee is entitled to enforce by law. If Franchisee commits any act of default under this Agreement for which Franchisor exercises its right to terminate this Agreement, Franchisee shall pay to Franchisor all actual, consequential, special and incidental damages Franchisor incurs as a result of the premature termination of this Agreement regardless of whether or not such damages are reasonably foreseeable. Franchisee acknowledges and agrees that the proximate cause of such damages sustained by Franchisor is Franchisee's act of default and not Franchisor's exercise of its right to terminate. Notwithstanding the foregoing, and except as otherwise prohibited or limited by applicable law, any failure, neglect, or delay of a party to assert any breach or violation of any legal or equitable right
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to the 2025 Checkersrallys Franchise Disclosure Document, if a franchisee defaults under the Franchise Agreement, Checkersrallys has the right to terminate the agreement. If Checkersrallys exercises its right to terminate the agreement due to the franchisee's default, the franchisee is responsible for paying Checkersrallys all actual, consequential, special, and incidental damages that Checkersrallys incurs as a result of the early termination. This obligation exists regardless of whether these damages were reasonably foreseeable. The franchisee acknowledges that their act of default is the direct cause of these damages, not Checkersrallys's decision to terminate the agreement.
This clause means that a Checkersrallys franchisee's default can lead to significant financial liabilities beyond just the loss of the franchise. The franchisee is essentially guaranteeing that they will fulfill the terms of the agreement and is liable for any losses Checkersrallys experiences if they fail to do so. This could include lost future royalties, costs associated with finding a new franchisee, and damage to the brand's reputation.
However, the FDD also states that any failure, neglect, or delay by either party to assert a breach or violation of any legal or equitable right does not necessarily mean a waiver of that right. This suggests that Checkersrallys's inaction on a previous default does not prevent them from taking action on a subsequent default. This section of the franchise agreement outlines the potential financial repercussions for a franchisee who fails to meet their obligations and also clarifies that Checkersrallys's leniency in one instance does not set a precedent for future breaches.