After the termination or expiration of a Carls franchise agreement, under what circumstances is a franchisee permitted to operate a restaurant under a name or manner that might suggest a connection to CJR or its affiliates?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
- H. Franchisee shall not, except with respect to a restaurant franchised by CJR or its affiliates which is then open and operating pursuant to an effective franchise agreement or a restaurant franchised by CJR or its affiliates which is under construction pursuant to a fully-signed franchise agreement: (1) operate or do business under any name or in any manner that might tend to give the public the impression that Franchisee is connected in any way with CJR or its affiliates or has any right to use the System or the Proprietary Marks; (2) make, use or avail itself of any of the materials or information furnished or disclosed by CJR or its affiliates under this Agreement or disclose or reveal any such materials or information or any portion thereof to anyone else; or (3) assist anyone not licensed by CJR or its affiliates to construct or equip a foodservice outlet substantially similar to a Carl's Jr. Restaurant.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to the 2024 Carls Franchise Disclosure Document, a franchisee is generally prohibited from operating a business that gives the impression of being connected with CJR or using Carls' proprietary marks after the termination or expiration of the franchise agreement. However, there is an exception if the franchisee operates a restaurant franchised by CJR or its affiliates, which is then open and operating under an effective franchise agreement, or if the restaurant is under construction pursuant to a fully-signed franchise agreement with CJR or its affiliates.
Specifically, the franchisee cannot operate under any name or manner that might lead the public to believe they are connected with Carls or have the right to use the Carls system or proprietary marks. They are also prohibited from using or disclosing any materials or information provided by Carls or assisting anyone not licensed by Carls to construct or equip a foodservice outlet similar to a Carls restaurant.
This restriction is designed to protect Carls' brand identity and prevent confusion among customers. It ensures that only authorized franchisees can represent the Carls brand and use its proprietary resources. A prospective franchisee should be aware of these post-termination restrictions and understand that they cannot leverage the Carls brand or system without explicit authorization after the franchise agreement ends.