What constitutes 'Designated Entrée Items' for the purposes of the competitive restrictions on a Carls Jr. franchisee?

According to the 2025 Carls Jr. Franchise Disclosure Document, the term 'Designated Entrée Items' is defined specifically within the context of competitive restrictions placed on franchisees. These restrictions are in place both during the term of the Franchise Agreement and for a period of two years after its expiration, transfer, or termination. Understanding this definition is crucial for franchisees to avoid violating the agreement and facing potential legal or financial repercussions.

For a Carls Jr. franchisee, 'Designated Entrée Items' include any hamburger sandwich, chicken sandwich, breakfast sandwich, and any other entrée item that Carls Jr. designates as part of their system at any point during the franchise agreement. This definition is important because it directly impacts the types of restaurant businesses a franchisee can be involved with, either directly or indirectly, during and after their agreement with Carls Jr. The restriction applies without geographical limitation during the agreement term and within a 2-mile radius of the franchised location (or any existing Carls Jr. restaurant) after the agreement ends.

The competitive restriction is triggered if a restaurant business sells 'Designated Entrée Items' and those items are reasonably likely to account for 20% or more of the restaurant's sales of all entrée items during any daypart. It is also triggered if the restaurant features or promotes any 'Designated Entrée Item' in its advertising or operates in a quick-service format. This means a franchisee needs to be very careful about investing in or operating any other food business that could be seen as competing with Carls Jr., even after their franchise agreement has ended.

It is important to note that this restriction does not apply to a franchisee's existing restaurant or foodservice operations, if any, which are identified in Appendix A of the Franchise Agreement, nor does it apply to other restaurants operated by the franchisee that are franchised by Carls Jr. or its affiliates. This provides some flexibility for franchisees who already have established businesses or who choose to expand their relationship with Carls Jr. by opening additional franchised locations.