Under what conditions might Carls Jr. consider variations from its standard system requirements for a franchisee?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
System and their trade secrets and confidential and proprietary information against unauthorized use or disclosure and would be unable adequately to encourage a free exchange of ideas and information among operators of Carl's Jr.
Restaurants if franchisees or developers were permitted to engage in the activities described in Section 12.C.(2)(a) or to hold interests in the businesses described in Section 12.C.(2)(b); (e) all restaurants operating in a quick-service format are substantial and direct competitors of the Carl's Jr.
System; and (f) the restrictions on Developer's right to hold interests in, or perform services for, businesses described in Section 12.C.(2)(b) will not unduly limit its activities.
(2) Accordingly, Developer covenants and agrees that, except with CJR's prior written consent, during the Development Term, and for a continuous period of 2 years following its expiration, transfer or termination, Developer 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 restaurant franchised or operated by CJR or its affiliates 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 real property underlying any 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).
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
Based on the 2025 Carls Jr. Franchise Disclosure Document, a developer is generally expected to adhere strictly to the standards and specifications outlined in the Development Guide. However, Carls Jr. may consider variations from these standard system requirements if the developer obtains prior written consent from CJR.
Specifically, the document states that developers cannot engage in certain activities or hold interests in businesses that compete with the Carls Jr. System without CJR's prior written consent. These restricted activities include diverting business from any restaurant franchised or operated by CJR or its affiliates, as well as owning or operating any restaurant business that competes with the Carls Jr. System. A competing restaurant is defined as one where sales of designated entree items account for 20% or more of the restaurant's sales during any daypart, features or promotes any designated entree item in its advertising, or operates in a quick-service format.
This requirement ensures that Carls Jr. maintains control over its brand and protects its competitive position. Obtaining written consent is crucial for any developer who wishes to deviate from the standard system requirements or engage in activities that might be seen as competitive. This protects the integrity of the Carls Jr. system and brand standards.