After the expiration, transfer, or termination of the Carls Jr. Development Agreement, what geographic areas are covered by the restriction on competitive restaurant businesses?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
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, following the expiration, transfer, or termination of the Development Agreement, the restriction on competitive restaurant businesses 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 for a period of two years after the agreement ends, a former developer is limited in operating or being involved with a competing restaurant within these defined geographic boundaries.
However, this restriction does not apply to the developer's existing restaurant or foodservice operations, if any, which are identified in Appendix B of the agreement. It also does not apply to other restaurants operated by the developer that are franchised by Carls Jr. or its affiliates. This clause ensures that existing businesses or other Carls Jr. franchises owned by the developer are not affected by the non-compete agreement.
Carls Jr. also retains the right to modify the scope of the non-compete covenant at its discretion. The franchisor can reduce the scope of the covenant with written notice, and the developer must comply with the modified covenant immediately. This provides Carls Jr. with flexibility to adjust the restrictions as needed. If any part of the restrictions is found to be unreasonable in time or distance, the terms can be adjusted by a court to what is deemed reasonable, ensuring the enforceability of the non-compete agreement.