During the term of the Franchise Agreement for a Carls restaurant, are both the Franchisee and the Operating Principal required to devote their full-time efforts to the restaurant's operation?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
urant at the Franchised Location during the term of this Agreement, as well as the mutual covenants, agreements and obligations set forth below, the parties agree as follows:
1. GRANT OF FRANCHISE
A. Grant
Subject to the provisions of this Agreement, CJR hereby grants to Franchisee the nonexclusive right ("Franchise") to develop and continuously operate the Franchised Restaurant at the Franchised Location and to use the Proprietary Marks in the operation of the Franchised Restaurant. Franchisee may not operate the Franchised Restaurant at any site other than the Franchised Location or offer and sell products through any other method or channel of distribution. Further, Franchisee may not relocate the Franchised Restaurant without CJR's prior written consent, which may be withheld by CJR in its sole discretion. If CJR approves a relocation of the Franchised Restaurant, it shall have the right to charge Franchisee for all reasonable expenses actually incurred in connection with consideration of the relocation request.
Franchisee agrees that it will at all times faithfully, honestly and diligently perform its obligations under this Agreement, that it will continuously exert its best efforts to promote and enhance the business of the Franchised Restaurant and that it will not engage in any other business or activity that may conflict with its obligations under this Agreement, except the operation of other Carl's Jr. Restaurants or other restaurants operated by Franchisee that are franchised by CJR or its affiliates or other restaurants as disclosed to CJR by Franchisee in Appendix A.
B. No Exclusivity
This Agreement does not give Franchisee any exclusive rights to use the System or the Proprietary Marks in any geographic area. Nothing in this Agreement prohibits CJR from, among other things: (1) operating or licensing others to operate at any location, during or after the term of this Agreement, any type of restaurant other than Carl's Jr. Restaurants; (2) operating or licensing others to operate, during the term of this Agreement, Carl's Jr. Restaurants at any location other than the Franchised Location; (3) operating or licensing others to operate, after this Agreement terminates or expires, Carl's Jr. Restaurants at any location, including the Franchised Location;
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, the Franchisee is expected to diligently perform their obligations under the Franchise Agreement and continuously exert their best efforts to promote the business of the franchised restaurant. The franchisee should not engage in any other business that may conflict with their obligations under the agreement, except for operating other Carls restaurants or other restaurants franchised by CJR or its affiliates, or other restaurants disclosed to CJR.
For the Operating Principal, the requirements are more specific. Unless a Multi-Unit Manager is approved, the Operating Principal must devote full-time and best efforts to supervising the operation of the franchised Carls restaurant and other Carls restaurants operated by the franchisee in the same geographic market. The Operating Principal cannot engage in any other business or activity that requires substantial management responsibility. This ensures that the Operating Principal is fully dedicated to the success and smooth operation of the Carls restaurants under their supervision.
If the franchisee operates Carls restaurants in multiple geographic markets and the Operating Principal does not meet the requirements for all markets, the franchisee must designate a Multi-Unit Manager. This manager must also devote full-time and best efforts to supervising the operation of the Carls restaurant and other Carls restaurants operated by the franchisee in the same geographic market, and cannot engage in other business activities requiring substantial management responsibility. This structure allows for oversight across multiple locations while maintaining a focus on the Carls business.