Under what conditions will Carls refrain from operating or licensing others to operate Carl's Jr. Restaurants in the Development Territory?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
te products identified by some or all of the Proprietary Marks in the Development Territory through any other method or channel of distribution; and (F) sell and distribute products identified by some or all of the Proprietary Marks in the Development Territory to restaurants other than Carl's Jr. Restaurants provided those restaurants are not licensed to use the Proprietary Marks in connection with their retail sales.
Except as described in the preceding paragraph, we will not, during the term of the Development Agreement, operate or license others to operate Carl's Jr. Restaurants in the Development Territory, provided you are in compliance with the terms of the Development Agreement and other agreements with us or our affiliates and you are current on all obligations due us and our affiliates. This does not prohibit us or our affiliates from: (1) operating and licensing others to operate, during the term of the Development Agreement, Carl's Jr. Restaurants at any location outside of the Development Territory; (2) operating and licensing others to operate, after the Development Agreement terminates or expires, Carl's Jr. Restaurants at any location; and (3) operating and licensing others to operate at any location, during or after the Development Term, any type of restaurant other than a Carl's Jr. Restaurant.
These restrictions apply only to CJR and do not apply to Carl's Jr. Restaurants in operation in the Development Territory as of the date of the Development Agreement. Nothing shall prohibit CJR or its affiliates from operating or licensing a restaurant at any location in or outside the Development Territory,
other than a restaurant in the Development Territory that primarily is identified by the name and mark "Carl's Jr."
Continuation of the limited restrictions on our ability to operate and license others to operate Carl's Jr. Restaurants in the Development Territory does not depend on your achieving a certain sales volume, market penetration or other contingency. However, if you are in default under the Development Agreement or any Franchise Agreement, we may terminate the Development Agreement and your limited rights in the Development Territory. There are no other circumstances in which we can unilaterally modify your limited rights in the Development Territory.
There are no restrictions on the areas in which you may advertise or solicit customers for your Franchised Restaurants; however, see Item 13 for Internet restrictions. We reserve all rights to use and license the Carl's Jr. System other than those we expressly grant you under the Development Agreement, the Franchise Agreement. There are no restrictions on the areas in which we may advertise or solicit customers, nor must we pay any compensation to you for soliciting or accepting orders from inside the Development Territory. The rights we reserve include the right to use any other channel of distribution, including the Internet, to make sales in the Development Territory using the Proprietary Marks or different proprietary marks.
Franchise Agreement
You will not receive any exclusive territory under the Franchise Agreement. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control. You do not receive the right, under the Franchise Agreement, to develop or operate more than one Franchised Restaurant. Our prior written consent is required before you relocate the Franchised Restaurant.
Source: Item 12 — TERRITORY (FDD pages 54–56)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, Carls will generally not operate or license others to operate Carl's Jr. Restaurants within the Development Territory during the term of the Development Agreement. However, this is conditional on the franchisee remaining in compliance with all agreements with Carls and its affiliates, and being current on all obligations owed to them.
Carls retains significant rights to operate or license others within the Development Territory in several specific situations. These include operating or licensing Carl's Jr. Restaurants in travel plazas, gas stations, convenience stores, airports, train stations, bus stations, toll plazas, stadiums, arenas, convention centers, military facilities, schools, colleges, universities, hospitals, recreational theme parks, business or industrial foodservice venues, venues in which foodservice is or may be provided by a master concessionaire or contract foodservice provider, Indian reservations, casinos, "ghost" or "dark" kitchens or any similar captive market location or non-traditional "brick and mortar" location. Carls can also award national or regional licenses to third parties to sell products under the Carl’s Jr. trademarks in foodservice facilities primarily identified by the third party's trademark. Additionally, Carls is not restricted from developing and operating restaurants other than Carl's Jr. Restaurants in the Development Territory, or from selling and distributing products identified by the Carl’s Jr. marks to other restaurants that are not licensed to use the marks for retail sales.
The continuation of these limited restrictions on Carls's ability to operate and license others does not depend on the franchisee achieving specific sales volumes or market penetration. However, if the franchisee defaults under the Development Agreement or any Franchise Agreement, Carls may terminate the Development Agreement, thereby ending the franchisee's limited rights within the Development Territory. The FDD specifies that there are no other circumstances in which Carls can unilaterally modify the franchisee's limited territorial rights.