Following the expiration, transfer, or termination of the Carls Jr. franchise agreement, what is the radius around the Franchised Location within which the restriction on operating a competing restaurant applies?
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. If, at any time during the 2 year period following the expiration, Transfer or termination of this Agreement, Franchisee fails to comply with its obligations under this Section, that period of noncompliance will not be credited toward Franchisee's satisfaction of the 2 year obligation.
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 operating a competing restaurant business within a 2-mile radius of the former Franchised Location. This restriction also applies to any restaurant business within a 2-mile radius of any then-existing Carls Jr. Restaurant. This restrictive covenant extends for a period of 2 years.
This means that after a Carls Jr. franchise agreement ends, the franchisee cannot open or be involved with a competing restaurant within the specified radius. The definition of a competing restaurant is one whose sales of designated entree items (hamburger sandwich, chicken sandwich, breakfast sandwich, or any other entree item designated by CJR) during any daypart are reasonably likely to account collectively for 20% or more of the restaurant's sales of all entree items during that daypart; that features or promotes any Designated Entrée Item in its advertising; or that operates in a quick-service format (with or without table service).
This restriction does not apply to the franchisee's existing restaurant or foodservice operations, if any, which are identified in Appendix A, nor shall it apply to other restaurants operated by the 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. If, at any time during the 2 year period following the expiration, Transfer or termination of this Agreement, Franchisee fails to comply with its obligations under this Section, that period of noncompliance will not be credited toward Franchisee's satisfaction of the 2 year obligation.
This type of restriction is common in franchising to protect the brand and prevent former franchisees from directly competing using knowledge gained from the franchise system. Prospective franchisees should carefully consider the implications of this restriction, especially if they have plans to operate other restaurant businesses in the future.