What did Arby's Restaurant Group, Inc. agree to do regarding the disputed 'no-poaching' provision in its franchise agreements, as disclosed in the Hardees FDD?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
(7) The People of the State of California v. Arby's Restaurant Group, Inc. (California Superior Court, Los Angeles County, Case No. 19STCV09397, filed March 19, 2019). On March 11, 2019, our affiliate, Arby's Restaurant Group, Inc. ("ARG"), entered into a settlement agreement with the states of California, Illinois, Iowa, Maryland, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Oregon and Pennsylvania. The Attorneys General in these states sought information from ARG on its use of franchise agreement provisions prohibiting the franchisor and franchisees from soliciting or employing each other's employees. The states alleged that the use of these provisions violated the states' antitrust, unfair competition, unfair or deceptive acts or practices, consumer protection and other state laws. ARG expressly denies these conclusions but decided to enter into the settlement agreement to avoid litigation with the states. Under the settlement agreement, ARG paid no money but agreed (a) to remove the disputed provision from its franchise agreements (which it had already done); (b) not to enforce the disputed provision in existing agreements or to intervene in any action by the Attorneys General if a franchisee seeks to enforce the provision; (c) to seek amendments of the existing franchise agreements in the applicable states to remove the disputed provision from the agreements; and (d) to post a notice and ask franchisees to post a notice to employees about the disputed provision.
Source: Item 3 — Litigation (FDD pages 23–27)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, Arby's Restaurant Group, Inc. (ARG) entered into a settlement agreement with multiple states concerning the use of franchise agreement provisions that prohibited the franchisor and franchisees from soliciting or employing each other's employees. These states alleged that such provisions violated antitrust, unfair competition, and consumer protection laws. While ARG expressly denied these conclusions, it entered the settlement to avoid litigation.
Under the settlement agreement, ARG agreed to several actions. First, it agreed to remove the disputed 'no-poaching' provision from its franchise agreements, which it had already done prior to the agreement. Second, ARG committed not to enforce the disputed provision in existing agreements. Third, ARG agreed not to intervene in any action by the Attorneys General if a franchisee sought to enforce the provision. Finally, ARG agreed to actively seek amendments to existing franchise agreements in the applicable states to remove the disputed provision and to post a notice informing employees about the disputed provision.
This settlement indicates a proactive approach to resolving legal challenges related to franchise agreement terms. For a prospective Hardees franchisee, this information highlights the importance of understanding the legal landscape and potential challenges related to employment practices within a franchise system. While this settlement did not involve Hardees directly, it demonstrates the potential for multi-state legal actions concerning franchise agreement terms and the willingness of franchisors to negotiate settlements to avoid protracted litigation.