During the Development Term for a Carls Jr. franchise, what is the geographic limitation on the restriction against owning or operating a competitive restaurant business?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
If any part of these restrictions is found to be unreasonable in time or distance, each month of time or mile of distance may be deemed a separate unit so that the time or distance may be reduced by appropriate order of the court to that deemed reasonable. If, at any time during the 2 year period following expiration, Transfer or termination of this Agreement, Developer fails to comply with its obligations under this Section, that period of noncompliance will not be credited toward Developer's satisfaction of the 2 year obligation.
D. Modification
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, during the Development Term, there is no geographical limitation on the restriction against owning or operating a competitive restaurant business. This means that as a Carls Jr. developer, you are restricted from owning or operating a competitive restaurant business anywhere during the Development Term.
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 post-term restriction is more limited geographically than the restriction during the Development Term.
It is important to note that these restrictions do not apply to any existing restaurant or foodservice operations the developer has that are identified in Appendix B of the agreement, or to other restaurants operated by the developer 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 at its sole discretion, effective immediately upon written notice to the developer.