Is a Carls franchisee allowed to alter customer reviews of their services or their competitors' services according to the FDD?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
(2) Accordingly, Developer covenants and agrees that, except with CJR's prior written consent, during the Development Term, and for a continuous period of 2 years following its expiration, transfer or termination, Developer shall not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with, any person, firm, partnership, corporation, or other entity:
(a) Divert or attempt to divert any business or customer, or potential business or customer, of any restaurant franchised or operated by CJR or its affiliates to any competitor, by direct or indirect inducement or otherwise.
Source: Item 23 — RECEIPTS (FDD pages 80–480)
What This Means (2024 FDD)
Based on the 2024 Carls Franchise Disclosure Document, a franchisee is prohibited from diverting business away from any restaurant franchised or operated by CJR or its affiliates to any competitor. This includes attempting to divert any business or customer, or potential business or customer, through direct or indirect inducement. This suggests that franchisees are not allowed to take actions that would unfairly impact the reputation or customer base of other Carls restaurants or its competitors.
This restriction is in place during the Development Term and for two years following its expiration, transfer, or termination. This non-compete clause ensures that franchisees remain committed to the Carls system and do not use their knowledge or resources gained from the franchise to benefit competing businesses, or negatively impact other franchisees.
While the FDD excerpt does not explicitly mention altering customer reviews, the restriction against diverting business could be interpreted to include manipulating reviews to harm competitors or unfairly promote their own location. A prospective Carls franchisee should seek clarification from the franchisor regarding specific policies on online reviews and marketing practices to ensure compliance with these regulations.