After the Carls franchise agreement expires, is transferred, or is terminated, what is the geographic radius around a Carls restaurant within which the franchisee is restricted from operating a competing restaurant?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
Following the expiration, transfer or termination of this Agreement, this restriction shall apply to any restaurant business located within a 2 mile radius of the Franchised Location and any restaurant business within a 2 mile radius of any then-existing Carl's Jr.
Restaurant.
This restriction shall not apply to Franchisee's existing restaurant or foodservice operations, if any, which are identified in Appendix A, nor shall it apply to other restaurants operated by Franchisee that are franchised by CJR or its affiliates.
If any part of these restrictions is found to be unreasonable in time or distance, each month of time or mile of distance may be deemed a separate unit so that the time or distance may be reduced by appropriate order of the court to that deemed reasonable. If, at any time during the 2 year period following the expiration, Transfer or termination of this Agreement, Franchisee fails to comply with its obligations under this Section, that period of noncompliance will not be credited toward Franchisee's satisfaction of the 2 year obligation.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to the 2024 FDD, following the expiration, transfer, or termination of the Carls franchise agreement, a franchisee is restricted from operating a competing restaurant business within a 2-mile radius of the former franchised location or any then-existing Carls Jr. restaurant. This restriction applies for a continuous period of 2 years.
This restriction is broad, as it not only includes the franchisee's former location but also any other Carls Jr. restaurants in the vicinity. A "restaurant business" is defined as one where sales of specific entrée items (hamburger, chicken, and breakfast sandwiches) are likely to account for 20% or more of the restaurant's sales during any part of the day, or one that features or promotes these items in its advertising, or operates in a quick-service format.
However, the restriction does not apply to the franchisee's existing restaurant or foodservice operations that are identified in Appendix A of the franchise agreement, or to other restaurants operated by the franchisee that are franchised by Carls or its affiliates. If any part of the restriction is found to be unreasonable in time or distance, the terms of the agreement allow for the time or distance to be reduced by a court order to what is deemed reasonable. Any period of noncompliance by the franchisee will not be credited toward fulfilling the 2-year obligation.