What constitutes 'Designated Entrée Items' for the purpose of non-compete restrictions in the Carls Jr. Development Agreement?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
For purposes of the previous sentence, the term "Designated Entrée Items" means any hamburger sandwich, chicken sandwich, breakfast sandwich and any other entrée item of a type designated by CJR as part of the Carl's Jr.
System at any time during the term of this Agreement.
During the Development Term, there is no geographical limitation on this restriction.
Following the expiration, transfer or termination of this Agreement, this restriction shall apply within the Development Territory, within 2 miles of the border of the Development Territory and within a 2-mile radius of any then-existing Carl's Jr.
Restaurant.
This restriction shall not apply to Developer's existing restaurant or foodservice operations, if any, which are identified in Appendix B, nor shall it apply to other restaurants operated by Developer that are franchised by CJR or its affiliates.
CJR shall have the right, in its sole discretion, to reduce the scope of any covenant in this Section 12 effective immediately upon Developer's receipt of written notice, and Developer agrees that it shall comply forthwith with any covenant as so modified, which shall be fully enforceable notwithstanding the provisions of Section 20.
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, 'Designated Entrée Items' are defined within the context of non-compete restrictions in the Development Agreement. Specifically, these items include any hamburger sandwich, chicken sandwich, breakfast sandwich, and any other entrée item that Carls Jr. designates as part of the Carl's Jr. system at any point during the agreement's term. This definition is important because it determines the scope of the non-compete clause, which restricts the franchisee from engaging in certain competitive restaurant businesses.
During the Development Term, there are no geographical limitations on this restriction. However, following the expiration, transfer, or termination of the Development Agreement, the restriction applies within the Development Territory, within 2 miles of the border of the Development Territory, and within a 2-mile radius of any then-existing Carls Jr. Restaurant. This means that after the franchise agreement ends, the franchisee is limited in operating or having an interest in a competing restaurant business within these specified areas.
The restriction does not apply to the franchisee's existing restaurant or foodservice operations if they are identified in Appendix B of the agreement, nor does it apply to other restaurants operated by the franchisee that are franchised by Carls Jr. or its affiliates. Carls Jr. also retains the right to reduce the scope of any covenant in this section of the agreement with written notice to the franchisee. This provides Carls Jr. with the flexibility to adjust the non-compete restrictions as needed. A prospective franchisee should carefully review Appendix B and understand the implications of these restrictions on any existing or planned business ventures.