What is a franchisee's obligation regarding the disclosure of Carls trade secrets to unauthorized persons?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee shall not, during the term of this Agreement or at any time thereafter, communicate or disclose any trade secrets or confidential or proprietary information or know-how of the System to any unauthorized person, or do or perform, directly or indirectly, any other acts injurious or prejudicial to any of the Proprietary Marks or the System. Any and all information, knowledge, know-how and techniques,
including all drawings, materials, equipment, specifications, recipes, techniques and other data that CJR or its affiliates designate as confidential shall be deemed confidential for purposes of this Agreement.
During the term of the Franchise Agreement, you will have access to trade secret information that is confidential and proprietary to us such as manuals, formulas, methods, Customer Information, vendor and pricing lists and policies. For example, the OPM and other materials contain CJR's detailed standards and specifications for managing and operating your Franchised Restaurant and other proprietary information may discuss the selection, purchase, storage, preparation, packaging, ingredients, recipes,
service and sale of the products and beverages you will sell at your Franchised Restaurant. The OPM also contains information on management and employee training, marketing, advertising and sales promotions, signs, fixtures and furnishings, employee dress attire and appearance standards, menu concept, and business practices and procedures, such as bookkeeping, accounting, records retention and other business systems.
You acknowledge that the trade secrets derive independent economic value from not being generally known to and not readily ascertainable to others. You agree to hold in confidence and agree not to disclose or in any way make available to any unauthorized person any trade secret or any information regarding any trade secret or any proprietary information made available to you by us. You may disclose trade secrets only to your employees and agents with a legitimate need to know, each of whom you will warrant will be subject to this confidentiality requirement. You also agree not to contest CJR's interest in the trade secrets and confidential and proprietary information that comprise the Carl's Jr. System.
Franchisee shall notify CKR immediately upon discovery of any prohibited use or disclosure of the Confidential Information, or any other breach of these confidentiality obligations by Franchisee, and shall fully cooperate with CKR to help CKR regain possession of the Confidential Information and prevent the further prohibited use or disclosure of the Confidential Information.
Source: Item 14 — PATENTS, COPYRIGHTS, AND PROPRIETARY INFORMATION (FDD pages 58–59)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, franchisees have strict obligations regarding the confidentiality of trade secrets. During the term of the Franchise Agreement and even after its termination, a franchisee must not communicate or disclose any trade secrets, confidential information, or proprietary know-how of the Carls Jr. system to any unauthorized person. This includes a wide array of information, knowledge, techniques, drawings, materials, equipment, specifications, recipes, and other data that Carls designates as confidential. This obligation is in place to protect the substantial investments Carls has made in developing the system and to maintain its competitive advantage.
Carls considers its trade secrets to have independent economic value because they are not generally known or easily discoverable by others. Franchisees must hold these secrets in confidence and not make them available to unauthorized individuals. Disclosure is permitted only to employees and agents with a legitimate need to know the information, and the franchisee must ensure that these individuals also adhere to the confidentiality requirements. Franchisees also agree not to contest Carls's interest in these trade secrets and proprietary information.
If a franchisee discovers any prohibited use or disclosure of confidential information, they must immediately notify Carls and fully cooperate to help Carls regain possession of the information and prevent further unauthorized use or disclosure. This includes safeguarding the information from theft, piracy, or unauthorized access with protections at least as stringent as those used to protect the franchisee's own most confidential information. Franchisees must also inform their employees of their confidentiality obligations and take reasonable steps to prevent any unauthorized disclosure, copying, or use of the confidential information. These measures are critical for maintaining the integrity and value of the Carls system.