Does the restriction on owning or operating competing restaurants apply to other restaurants franchised by CJR or its affiliates that are operated by the Carls Jr. Developer?

According to the 2025 Carls Jr. Franchise Disclosure Document, the restriction on owning or operating competing restaurants does not apply to other restaurants franchised by CJR or its affiliates that are operated by the Carls Jr. Developer. Specifically, the FDD states that the restriction outlined in Section 12.C.(2)(b) does not apply to other restaurants operated by the Developer that are franchised by CJR or its affiliates. This means a Carls Jr. developer can operate other franchise brands under the CJR umbrella without violating the non-compete clause.

This exception to the non-compete agreement is significant for a Carls Jr. developer as it allows for diversification within the CJR franchise system. A developer could potentially operate multiple restaurant brands franchised by CJR, thereby expanding their business portfolio and potentially increasing revenue streams. This could be particularly beneficial in markets where different restaurant concepts might appeal to varying customer segments or dayparts.

However, it is important to note that this exception only applies to restaurants franchised by CJR or its affiliates. The developer is still restricted from owning or operating competing restaurant businesses that are not part of the CJR franchise system, both during the Development Term and for two years following its expiration, transfer, or termination, within certain geographical limits. This restriction includes businesses whose sales of designated entrée items account for 20% or more of the restaurant's sales, those that feature or promote any designated entree item in its advertising or those that operate in a quick-service format.

Prospective Carls Jr. developers should carefully review Appendix B of the Development Agreement, which identifies any existing restaurant or foodservice operations of the developer that are also exempt from the non-compete restrictions. Understanding the full scope of these restrictions and exceptions is crucial for making informed business decisions and ensuring compliance with the terms of the Development Agreement.