Following the expiration, transfer, or termination of the Carls Jr. agreement, what is the geographic limitation on the restriction regarding a franchisee's involvement with competing restaurant businesses?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
Following the expiration, transfer or termination of this Agreement, this restriction shall apply to any restaurant business located within a 2 mile radius of the Franchised Location and any restaurant business within a 2 mile radius of any then-existing Carl's Jr.
Restaurant.
This restriction shall not apply to Franchisee's existing restaurant or foodservice operations, if any, which are identified in Appendix A, nor shall it apply to other restaurants operated by Franchisee 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.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, following the expiration, transfer, or termination of the Franchise Agreement, a franchisee is restricted from involvement in a competing restaurant business. This restriction applies to any restaurant business located within a 2-mile radius of the former franchised location. It also extends to any restaurant business within a 2-mile radius of any then-existing Carls Jr. restaurant.
This geographic restriction means that a former franchisee cannot operate, own, or be involved with a competing restaurant within these specified zones. The definition of a competing restaurant is one whose sales of specific entrée items (hamburger, chicken, or breakfast sandwiches, or other items designated by Carls Jr.) are likely to account for 20% or more of the restaurant's sales during any part of the day, or one that features or promotes these items in its advertising, or operates in a quick-service format.
However, this restriction does not apply to any existing restaurant or foodservice operations that the franchisee already owns, as long as these were identified in Appendix A of the Franchise Agreement. It also does not apply to other restaurants operated by the franchisee that are franchised by Carls Jr. or its affiliates. If any part of these restrictions is found to be unreasonable in time or distance, the terms can be adjusted by a court to what is deemed reasonable.