What is the duration of the non-compete period following the expiration, transfer, or termination of the Carls Jr. Development Agreement?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
. System to others for use or duplication in any other business, would constitute an unfair method of competition, for which CJR would be entitled to all legal and equitable remedies, including injunctive relief, without posting a bond.
Developer shall not, during the Development Term or at any time thereafter, communicate or disclose any trade secrets or confidential or proprietary information or know-how of the Carl's Jr. System to any unauthorized person, or do or perform, directly or indirectly, any other acts injurious or prejudicial to any of the Proprietary Marks or the Carl's Jr. System. Any and all information, knowledge, know-how and techniques, including all drawings, materials, equipment, specifications, recipes, techniques and other data that CJR or its affiliates designate as confidential shall be deemed confidential for purposes of this Agreement.
If Developer develops any new concepts, processes or improvements relating to the Carl's Jr. System, Developer promptly shall notify CJR and provide CJR with all information regarding the new concept, process or improvement, all of which shall become the property of CJR and its affiliates and which may be incorporated into the Carl's Jr. System without any payment to Developer. Developer promptly shall take all actions deemed necessary or desirable by CJR to vest in CJR ownership of such concepts, processes or improvements.
C. Restrictions
- (1) Developer acknowledges and agrees that: (a) pursuant to this Agreement, Developer will have access to valuable trade secrets, specialized training and other confidential information from CJR and/or its affiliates regarding the development, operation, product preparation and sales, market and operations research, advertising and marketing plans and strategies, purchasing, sales and marketing methods and techniques of CJR and/or its affiliates and the Carl's Jr. System; (b) the know-how regarding the Carl's Jr. System and the opportunities, associations and experience acquired by Developer pursuant to this Agreement are of substantial value; (c) in developing the Carl's Jr. System, CJR and/or its affiliates have made substantial investments of time, effort and money; (d) CJR would be unable adequately to protect the Carl's Jr. System and their trade secrets and confidential and proprietary information against unauthorized use or disclosure and would be unable adequately to encourage a free exchange of ideas and information among operators of Carl's Jr. Restaurants if franchisees or developers were permitted to engage in the activities described in Section 12.C.(2)(a) or to hold interests in the businesses described in Section 12.C.(2)(b); (e) all restaurants operating in a quick-service format are substantial and direct competitors of the Carl's Jr. System; and (f) the restrictions on Developer's right to hold interests in, or perform services for, businesses described in Section 12.C.(2)(b) will not unduly limit its activities.
- (2) Accordingly, Developer covenants and agrees that, except with CJR's prior written consent, during the Development Term, and for a continuous period of 2 years following its expiration, transfer or termination, Developer shall not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with, any person, firm, partnership, corporation, or other entity:
- (a) Divert or attempt to divert any business or customer, or potential business or customer, of any restaurant franchised or operated by CJR or its affiliates to any competitor, by direct or indirect inducement or otherwise.
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, a developer is subject to a non-compete covenant for a period of two years following the expiration, transfer, or termination of the Development Agreement. During this period, the developer is restricted from engaging in activities that could compete with the Carls Jr. system. Specifically, the developer cannot divert business from any restaurant franchised or operated by Carls Jr. or its affiliates.
This restriction includes owning, operating, or having any interest in a restaurant business that meets certain criteria. These criteria include restaurants where the sales of specific entrée items (like hamburger or chicken sandwiches) are likely to account for 20% or more of the restaurant's sales during any part of the day, restaurants that feature or promote these items in their advertising, or restaurants that operate in a quick-service format.
Following the expiration, transfer or termination of the Development Agreement, these restrictions 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 Carls Jr. Restaurant. However, this restriction does not apply to the developer's existing restaurant or foodservice operations, if any, which are identified in Appendix B, nor shall it apply 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.