Does the restriction on a Carls Jr. franchisee apply to a restaurant business that features or promotes any Designated Entrée Item in its advertising?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
- (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 owning, operating, or having an interest in any restaurant business that features or promotes any Designated Entrée Item in its advertising. This restriction is in place during the term of the Franchise Agreement and for two years following its expiration, transfer, or termination.
The term "Designated Entrée Items" includes hamburger sandwiches, chicken sandwiches, breakfast sandwiches, and any other entrée item designated by Carls Jr. as part of their system during the agreement. This means a franchisee cannot be involved with a competing restaurant that heavily advertises these types of items.
During the term of the agreement, there is no geographical limitation to this restriction. However, after the agreement ends, the restriction applies only to restaurant businesses within a 2-mile radius of the former franchised location or any existing Carls Jr. restaurant. This restriction does not apply to any existing restaurant or foodservice operations the franchisee already owns, as identified in Appendix A, or to other restaurants franchised by Carls Jr. or its affiliates. This clause aims to protect Carls Jr.'s market share and prevent franchisees from directly competing with the brand, especially using knowledge gained during their time as a franchisee.