What is the time period after the Hardees franchise agreement expires during which the franchisee is restricted from 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, a franchisee is restricted from operating a competing restaurant for a period of two years after the expiration, transfer, or termination of the franchise agreement. This restriction applies to any restaurant business located within a 2-mile radius of the former Hardee's location or any existing Hardee's Restaurant.
This non-compete clause prevents a former Hardees franchisee from leveraging their experience and knowledge gained while operating a Hardees restaurant to directly compete with the brand immediately after their franchise agreement ends. The restriction is limited to a 2-mile radius, which aims to protect existing Hardees locations from direct competition from a former franchisee in close proximity.
However, this restriction does not apply to any existing restaurant or foodservice operations the franchisee had before signing the Hardees agreement, as long as these were identified in Appendix A of the agreement. Also, the restriction does not apply to other restaurants operated by the franchisee that are franchised by Hardees or its affiliates. This allows franchisees to continue operating other restaurant businesses they own, provided they are not competitive with Hardees or are part of the Hardees system.
It is important for prospective franchisees to carefully consider the implications of this non-compete clause, especially if they have existing restaurant businesses or plan to open other restaurants after their Hardees franchise agreement expires. Understanding the scope and limitations of the restriction is crucial for future business planning.