During the term of the Hardees franchise agreement, can a franchisee divert business from a Hardees Restaurant to a competitor?
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, a franchisee is restricted from diverting business from a Hardees Restaurant to a competitor during the term of the franchise agreement. Specifically, the franchisee agrees not to divert or attempt to divert any business or customer of any Hardee's Restaurant to any competitor through direct or indirect means, unless they obtain prior written consent from Hardees. This restriction applies without any geographical limitation during the term of the agreement.
This clause aims to protect the Hardees brand and its established customer base. It prevents franchisees from leveraging the knowledge and resources gained from operating a Hardees franchise to benefit a competing business. This is a standard practice in franchising, as franchisors need to ensure that franchisees are fully committed to the success of the Hardees system and not working against it.
After the franchise agreement expires, is transferred, or is terminated, the franchisee is still restricted from operating a competing restaurant business within a 2-mile radius of the former Hardees location or any other existing Hardees Restaurant. This post-term restriction lasts for a continuous period of 2 years. However, this restriction does not apply to any existing restaurant or foodservice operations the franchisee already owns, as identified in Appendix A of the franchise agreement, or to other restaurants operated by the franchisee that are also franchised by Hardees or its affiliates.