After the Hardees franchise agreement expires, what is the geographic restriction on owning or operating a competing restaurant?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
- (2) Accordingly, Franchisee covenants and agrees that, except with HR's prior written consent, during the term of this Agreement, and for a continuous period of 2 years following its expiration, Transfer, or termination, Franchisee 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 Hardee's Restaurant 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 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 HR 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 Hardee's 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 HR or its affiliates.
Source: Item 22 — Contracts (FDD page 85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, following the expiration, transfer, or termination of the franchise agreement, a franchisee is restricted from engaging in any restaurant business that competes with Hardees. This restriction applies for a continuous period of 2 years. The geographic scope of this restriction extends to any restaurant business located within a 2-mile radius of the former Franchised Location and also to any restaurant business within a 2-mile radius of any then-existing Hardee's Restaurant.
This restriction is triggered if the competing restaurant meets any of the following criteria: (i) its sales of designated entrée items (hamburger sandwich, chicken sandwich, breakfast sandwich and any other entrée item of a type designated by HR) 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) it features or promotes any designated entrée item in its advertising; or (iii) it operates in a quick-service format (with or without table service).
However, this restriction does not apply to the franchisee's existing restaurant or foodservice operations, if any, which are identified in Appendix A, nor does it apply to other restaurants operated by the franchisee that are franchised by Hardees or its affiliates. This means a franchisee may continue to operate other restaurant businesses they owned before signing the Hardees agreement, or other Hardees franchises, without violating the non-compete clause.