How far can a franchisee diverge from the corporate standard in a chain resturant?

I’m no big-city lawyer, but you’d think the chains would have a clause in their franchise agreements that barred a franchisee from also operating a competing franchise.

You are correct at least according to this McDonald’s franchise agreement.

Is Long John Silvers under the same umbrella? In Chicago I think there are a couple combined with Taco Bell and KFC - man were the menus annoying.

At one point, Yum! did also own Long John Silvers (and A&W), which led to those combo restaurants, as well, but they spun both of those back off in 2011.

As Tired & Cranky notes, McDonald’s is pretty stringent in their franchisee agreements about this; other restaurants are often not as rigorous about it.

I used to have Applebee’s as a client; their franchisee structure was that they had a relatively small number of franchisees: a single franchisee ran every restaurant in a city / region (and a number of the big franchisees controlled multiple regions). Almost without exception, every one of their franchisees also operated franchises for other companies (usually fast-food restaurants, rather than casual dining, like Applebee’s).

We call those “Kentucky Fried Taco Huts”.

I once went into a Harvey’s that had invisible rabbit on the menu.