After termination or expiration of the Carls Jr. Development Agreement, can the Developer continue to open Franchised Restaurants in the Development Territory?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
Upon termination or expiration of this Agreement:
- A. Developer shall have no further right to develop or open Franchised Restaurants in the Development Territory, except that Developer shall be entitled to complete and open a Franchised Restaurant for which a Franchise Agreement has been fully executed. Termination or expiration of this Agreement shall not affect Developer's right to continue to operate Franchised Restaurants that were open and operating as of the date this Agreement terminated or expired.
- B. The limited exclusive rights granted Developer in the Development Territory shall terminate and CJR shall have the right to operate or license others to operate Carl's Jr. Restaurants anywhere in the Development Territory.
- C. Developer promptly shall return to CJR all materials and information furnished by CJR or its affiliates, except materials and information furnished with respect to a Franchised Restaurant under development for which there is an effective Franchise Agreement or a Franchised Restaurant which is open and operating pursuant to an effective Franchise Agreement.
- D. Developer and all persons and entities subject to the covenants contained in Section 12 shall continue to abide by those covenants and shall not, directly or indirectly, take any action that violates those covenants.
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, after the termination or expiration of the Development Agreement, the developer generally loses the right to develop or open new franchised restaurants in the designated territory. However, there is a specific exception: the developer can proceed with opening a restaurant if a Franchise Agreement has already been fully executed for that location before the termination or expiration date. This exception allows the developer to complete projects already in progress, but it does not permit initiating new projects after the agreement ends.
Carls Jr. also retains the right to operate or license others to operate Carls Jr. restaurants within the former development territory once the agreement concludes. This means that the developer's limited exclusive rights to the territory cease, and Carls Jr. can establish new franchises or operate company-owned stores in the area. This provision ensures that Carls Jr. can continue to expand its brand presence in the territory, even after the development agreement with the original developer has ended.
The developer is also obligated to return all materials and information provided by Carls Jr., except those related to restaurants under development with an effective Franchise Agreement or those already open and operating under such an agreement. Furthermore, the developer remains bound by the non-compete covenants outlined in the agreement, preventing them from engaging in activities that could harm the Carls Jr. brand or business interests for a specified period. This includes restrictions on operating or having interests in competing quick-service restaurants.
In summary, while the termination or expiration of the Development Agreement generally ends the developer's expansion rights, Carls Jr. allows the completion of projects already under contract and reasserts its control over future development in the territory. This ensures a smooth transition and protects Carls Jr.'s interests while providing a limited exception for ongoing projects.