For how long after the expiration, transfer, or termination of the Carls Jr. agreement is the franchisee restricted from engaging in competitive activities without CJR's consent?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
(2) Accordingly, Franchisee covenants and agrees that, except with CJR's prior written consent, during the term of this Agreement, and for a continuous period of 2 years following its expiration, transfer, or termination, Franchisee 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 Carl's Jr.
Restaurant to any competitor, by direct or indirect inducement or otherwise.
- (b) Own, maintain, operate, engage in, grant a franchise to, advise, help, make loans to, lease property to, sell the property underlying the Franchised Location and related assets to, or have any interest in, either directly or indirectly, any restaurant business: (i) whose sales of Designated Entrée Items (as defined below) during any daypart are reasonably likely to account collectively for 20% or more of the restaurant's sales of all entrée items during that daypart; (ii) that features or promotes any Designated Entrée Item in its advertising; or (iii) that operates in a quick-service format (with or without table service).
For purposes of the previous sentence, the term "Designated Entrée Items" means any hamburger sandwich, chicken sandwich, breakfast sandwich and any other entrée item of a type designated by CJR as part of the System at any time during the term of this Agreement.
During the term of this Agreement, there is no geographical limitation on this restriction.
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.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, a franchisee is restricted from engaging in competitive activities for a period of two years following the expiration, transfer, or termination of their franchise agreement, unless they obtain prior written consent from CJR. This restriction prevents the franchisee from directly or indirectly diverting business or customers from any Carls Jr. Restaurant to a competitor.
The restrictions apply to owning, operating, or having any interest in a restaurant business that meets certain criteria. These criteria include restaurants where the sales of specific "Designated Entrée Items" (such as hamburger sandwiches, chicken sandwiches, and breakfast sandwiches) are likely to account for 20% or more of the restaurant's sales during any daypart, restaurants that feature or promote any Designated Entrée Item in their advertising, or restaurants that operate in a quick-service format. During the term of the agreement, there is no geographical limitation to this restriction.
After the agreement expires, is transferred, or is terminated, the restriction applies to any restaurant business located within a 2-mile radius of the former Franchised Location and any restaurant business within a 2-mile radius of any then-existing Carls Jr. Restaurant. This restriction does not apply to the franchisee's existing restaurant or foodservice operations, if any, which are identified in Appendix A, nor does it apply to other restaurants operated by the franchisee that are franchised by CJR or its affiliates. This non-compete clause is a standard practice in franchising to protect the brand and market share of Carls Jr.