For Carls Jr., how long after the expiration, transfer, or termination of the Franchise Agreement do the restrictions in Section 20 apply to guarantors?

According to the 2025 Carls Jr. Franchise Disclosure Document, the restrictions outlined in Section 20 of the franchise agreement apply to both the franchisee and any guarantors of the franchisee's obligations. For guarantors, these restrictions remain in effect for a period of two years. This two-year period is calculated from the earlier of two possible dates: either the expiration, transfer, or termination date of the Franchise Agreement, or the date the guarantor ceases to be the Operating Principal, a stockholder, member of the Continuity Group, or a 10% Owner. If the guarantor is the spouse of someone holding one of these positions, the restrictions apply until that person ceases to hold the position.

This means that even after the franchise agreement ends, or if the guarantor steps down from a key role within the franchise, they are still bound by the restrictions in Section 20 for two years. These restrictions likely involve non-compete clauses or confidentiality agreements, preventing the guarantor from engaging in activities that could harm the Carls Jr. business.

It is important to note that these restrictions do not apply to ownership of less than 5% of the equity securities of any publicly held corporation. This clause provides a carve-out for minor investments in publicly traded companies, even if those companies might be considered competitors. Carls Jr. also has the right to request similar covenants from the franchisee's stockholders, managers, directors, members, officers, restaurant managers, and family members of guarantors, unless prohibited by law, further extending the reach of these restrictions.