During the term of the Carls franchise agreement, what is the geographic limitation on the restriction regarding owning or operating a competing restaurant business?

According to the 2024 Carls Franchise Disclosure Document, during the term of the franchise agreement, there is no geographical limitation on the restriction regarding owning or operating a competing restaurant business. This means that as a franchisee, you are restricted from owning, operating, or having any interest in a competing restaurant business anywhere in the world while you are a Carls franchisee.

The FDD specifies that this restriction applies to any restaurant business whose sales of specific entrée items (hamburgers, chicken sandwiches, breakfast sandwiches, or other items designated by Carls) are reasonably likely to account for 20% or more of the restaurant's sales during any daypart. It also applies to restaurants that feature or promote these designated entrée items in their advertising or operate in a quick-service format.

After the franchise agreement expires, is transferred, or is terminated, the geographic scope of this restriction changes. At that point, the restriction applies only to restaurant businesses located within a 2-mile radius of the former franchised location and any Carls restaurant. This post-term restriction lasts for a period of two years. The FDD also notes that existing restaurant or foodservice operations that the franchisee already owns (and are listed in Appendix A) and other restaurants franchised by Carls or its affiliates are exempt from these restrictions.