SUBSIDIARY GUARANTY AGREEMENT dated as of March 9, 2007 by and among

Exhibit 10.4

EXECUTION COPY

SUBSIDIARY GUARANTY AGREEMENT

dated as of March 9, 2007

by and among

CERTAIN SUBSIDIARIES OF CARROLS CORPORATION,

as Subsidiary Guarantors,

in favor of

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Agent

TABLE OF CONTENTS

i

SUBSIDIARY GUARANTY AGREEMENT (as amended, restated, supplemented or otherwise modified, this “ Subsidiary Guaranty ” or this “ Agreement ”), dated as of March 9 , 2007, is made by certain Subsidiaries of CARROLS CORPORATION, a Delaware corporation, who are or may become a party hereto (such Subsidiaries, collectively, the “ Subsidiary Guarantors ”, each, a “ Subsidiary Guarantor ”), in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, as administrative agent (in such capacity, the “ Agent ”) for the ratable benefit of itself and the Secured Parties.

STATEMENT OF PURPOSE

Pursuant to the terms of the Loan Agreement dated as of even date herewith (as amended, restated, supplemented or otherwise modified from time to time, the “ Loan Agreement ”) by and among Carrols Corporation, a Delaware corporation, as borrower (the “ Borrower ”), the financial institutions who are or may become party thereto (the “ Lenders ”) and the Agent, the Lenders have agreed to make extensions of credit to the Borrower upon the terms and subject to the conditions set forth therein.

The Borrower and the Subsidiary Guarantors, though separate legal entities, comprise one integrated financial enterprise, and all extensions of credit to the Borrower will inure, directly or indirectly to the benefit of each of the Subsidiary Guarantors.

It is a condition precedent to the obligation of the Lenders to make their respective extensions of credit to the Borrower under the Loan Agreement that the Subsidiary Guarantors shall have executed and delivered this Subsidiary Guaranty to the Agent, for the ratable benefit of itself and the Secured Parties.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, and to induce the Agent and the Lenders to enter into the Loan Agreement and to induce the Lenders to make their respective extensions of credit to the Borrower thereunder, the Subsidiary Guarantors hereby agree with the Agent, for the ratable benefit of itself and the Secured Parties, as follows:

ARTICLE I

DEFINED TERMS

SECTION 1.1 Definitions . The following terms when used in this Subsidiary Guaranty shall have the meanings assigned to them below:

“ Applicable Insolvency Laws ” means all Legal Requirements governing bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors, dissolution, insolvency, fraudulent transfers or conveyances or other similar laws (including, without limitation, 11 U.S.C. Sections 544, 547, 548 and 550 and other “avoidance” provisions of Title 11 of the United States Code, as amended or supplemented).

“ Guaranteed Obligations ” has the meaning set forth in Section 2.1 .

“ Parent ” means Carrols Restaurant Group, Inc., a Delaware corporation.

1

“ Secured Parties ” means the Agent, each Lender and any counterparty to an Interest Rate Risk Agreement that is a Lender or an Affiliate of a Lender at the time such Interest Rate Risk Agreement is executed.

“ Subsidiary Guaranty ” means this Subsidiary Guaranty Agreement, as amended, restated, supplemented or otherwise modified.

SECTION 1.2 Other Definitional Provisions . Capitalized terms used and not otherwise defined in this Subsidiary Guaranty including the preambles and recitals hereof shall have the meanings ascribed to them in the Loan Agreement. In the event of a conflict between capitalized terms defined herein and in the Loan Agreement, the Loan Agreement shall control. The words “hereof,” “herein”, “hereto” and “hereunder” and words of similar import when used in this Subsidiary Guaranty shall refer to this Subsidiary Guaranty as a whole and not to any particular provision of this Subsidiary Guaranty, and Section references are to this Subsidiary Guaranty unless otherwise specified. The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Subsidiary Guarantor, shall refer to such Subsidiary Guarantor’s Collateral or the relevant part thereof.

ARTICLE II

GUARANTY

SECTION 2.1 Subsidiary Guaranty . Each Subsidiary Guarantor hereby, jointly and severally with the other Subsidiary Guarantors, unconditionally guarantees to the Agent for the ratable benefit of itself and the Secured Parties, and their respective permitted successors, endorsees, transferees and assigns, the prompt payment and performance of:

(a) all Obligations of the Borrower; and

(b) all liabilities and obligations of the Parent and each of its Subsidiaries with respect to overdrafts, returned items and related liabilities and all indemnification obligations under the Loan Documents now or hereafter owing by any such Person to the Agent or any Lender arising from or in connection with treasury, depositary or cash management services or in connection with any automated clearinghouse transfer of funds for the benefit of such Person, in each case, whether primary or secondary (whether by way of endorsement or otherwise), whether now existing or hereafter arising, whether or not from time to time reduced or extinguished (except by payment thereof) or hereafter increased or incurred, whether enforceable or unenforceable as against the Borrower, whether or not discharged, stayed or otherwise affected by any Applicable Insolvency Law or proceeding thereunder, whether created directly with the Agent or any Secured Party or acquired by the Agent or any Secured Party through assignment or endorsement or otherwise, whether matured or unmatured, whether joint or several, as and when the same become due and payable (whether at maturity or earlier, by reason of acceleration, mandatory repayment or otherwise), in accordance with the terms of any such instruments evidencing any such obligations, including all renewals, extensions or modifications thereof (all Obligations of the Borrower, including all of the foregoing being hereafter collectively referred to as the “ Guaranteed Obligations ”).

2

SECTION 2.2 Bankruptcy Limitations on Subsidiary Guarantors . Notwithstanding anything to the contrary contained in Section 2.1 , it is the intention of each Subsidiary Guarantor and the Secured Parties that, in any proceeding involving the bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors, dissolution or insolvency or any similar proceeding with respect to any Subsidiary Guarantor or its assets, the amount of such Subsidiary Guarantor’s obligations with respect to the Guaranteed Obligations shall be equal to, but not in excess of, the maximum amount thereof not subject to avoidance or recovery by operation of Applicable Insolvency Laws after giving effect to Section 2.3(a) . To that end, but only in the event and to the extent that after giving effect to Section 2.3(a) such Subsidiary Guarantor’s obligations with respect to the Guaranteed Obligations or any payment made pursuant to such Guaranteed Obligations would, but for the operation of the first sentence of this Section 2.2 , be subject to avoidance or recovery in any such proceeding under Applicable Insolvency Laws after giving effect to Section 2.3(a) , the amount of such Subsidiary Guarantor’s obligations with respect to the Guaranteed Obligations shall be limited to the largest amount which, after giving effect thereto, would not, under Applicable Insolvency Laws, render such Subsidiary Guarantor’s obligations with respect to the Guaranteed Obligations unenforceable or avoidable or otherwise subject to recovery under Applicable Insolvency Laws. To the extent any payment actually made pursuant to the Guaranteed Obligations exceeds the limitation of the first sentence of this Section 2.2 and is otherwise subject to avoidance and recovery in any such proceeding under Applicable Insolvency Laws, the amount subject to avoidance shall in all events be limited to the amount by which such actual payment exceeds such limitation and the Guaranteed Obligations as limited by the first sentence of this Section 2.2 shall in all events remain in full force and effect and be fully enforceable against such Subsidiary Guarantor. The first sentence of this Section 2.2 is intended solely to preserve the rights of the Agent hereunder against such Subsidiary Guarantor in such proceeding to the maximum extent permitted by Applicable Insolvency Laws and neither such Subsidiary Guarantor, the Borrower, any other Subsidiary Guarantor nor any other Person shall have any right or claim under such sentence that would not otherwise be available under Applicable Insolvency Laws in such proceeding.

SECTION 2.3 Agreements for Contribution .

(a) The Subsidiary Guarantors hereby agree among themselves that, if any Subsidiary Guarantor shall make an Excess Payment (as defined below), such Subsidiary Guarantor shall have a right of contribution from each other Subsidiary Guarantor in an amount equal to such other Subsidiary Guarantor’s Contribution Share (as defined below) of such Excess Payment. The payment obligations of any Subsidiary Guarantor under this Section 2.3(a) shall be subordinate and subject in right of payment to the Guaranteed Obligations until such time as the Guaranteed Obligations have been paid in full, and none of the Subsidiary Guarantors shall exercise any right or remedy under this Section 2.3(a) against any other Subsidiary Guarantor until such Guaranteed Obligations have been paid in full. For purposes of this Section 2.3(a) :

(i) “ Excess Payment ” shall mean the amount paid by any Subsidiary Guarantor in excess of its Ratable Share of any Guaranteed Obligations;

3

(ii) “ Ratable Share ” shall mean, for any Subsidiary Guarantor in respect of any payment of Guaranteed Obligations, the ratio (expressed as a percentage) as of the date of such payment of Guaranteed Obligations of:

(A) the amount by which the aggregate present fair salable value of all of its assets and properties exceeds the amount of all debts and liabilities of such Subsidiary Guarantor (including probable contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of such Subsidiary Guarantor hereunder), to

(B) the amount by which the aggregate present fair salable value of all assets and other properties of all of the Subsidiary Guarantors exceeds the amount of all of the debts and liabilities (including probable contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of the Subsidiary Guarantors hereunder) of the Subsidiary Guarantors;

provided , however , that, for purposes of calculating the Ratable Shares of the Subsidiary Guarantors in respect of any payment of Guaranteed Obligations, any Subsidiary Guarantor that became a Subsidiary Guarantor subsequent to the date of any such payment shall be deemed to have been a Subsidiary Guarantor on the date of such payment and the financial information for such Subsidiary Guarantor as of the date such Subsidiary Guarantor became a Subsidiary Guarantor shall be utilized for such Subsidiary Guarantor in connection with such payment; and

(iii) “ Contribution Share ” shall mean, for any Subsidiary Guarantor in respect of any Excess Payment made by any other Subsidiary Guarantor, the ratio (expressed as a percentage) as of the date of such Excess Payment of:

(A) the amount by which the aggregate present fair salable value of all of its assets and properties exceeds the amount of all debts and liabilities of such Subsidiary Guarantor (including probable contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of such Subsidiary Guarantor hereunder), to

(B) the amount by which the aggregate present fair salable value of all assets and other properties of the Subsidiary Guarantors other than the maker of such Excess Payment exceeds the amount of all of the debts and liabilities (including probable contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of the Subsidiary Guarantors) of the Subsidiary Guarantors other than the maker of such Excess Payment;

provided , however , that, for purposes of calculating the Contribution Shares of the Subsidiary Guarantors in respect of any Excess Payment, any Subsidiary Guarantor that became a Subsidiary Guarantor subsequent to the date of any such Excess Payment shall be deemed to have been a Subsidiary Guarantor on the date of such Excess Payment and the financial information for such Subsidiary Guarantor as of the date such Subsidiary Guarantor became a Subsidiary Guarantor shall be utilized for such Subsidiary Guarantor in connection with such Excess Payment.

4

Each of the Subsidiary Guarantors recognizes and acknowledges that the rights to contribution arising hereunder shall constitute an asset in favor of the party entitled to such contribution. This Section 2.3 shall not be deemed to affect any right of subrogation, indemnity, reimbursement or contribution that any Subsidiary Guarantor may have under any Legal Requirement against the Borrower in respect of any payment of Guaranteed Obligations.

(b) No Subrogation . Notwithstanding any payment or payments by any of the Subsidiary Guarantors hereunder, or any set-off or application of funds of any of the Subsidiary Guarantors by the Agent or any Secured Party, or the receipt of any amounts by the Agent or any Secured Party with respect to any of the Guaranteed Obligations, none of the Subsidiary Guarantors shall be entitled to be subrogated to any of the rights of the Agent or any Secured Party against the Borrower, any of the other Subsidiary Guarantors, the Parent or any other guarantor of the Guaranteed Obligations or against any collateral security held by the Agent or any Secured Party for the payment of the Guaranteed Obligations, nor shall any of the Subsidiary Guarantors seek any reimbursement from the Borrower, any of the other Subsidiary Guarantors, the Parent or any other guarantor of the Guaranteed Obligations in respect of payments made by such Subsidiary Guarantor in connection with the Guaranteed Obligations, until all amounts owing to the Agent and the Secured Parties on account of the Guaranteed Obligations are paid in full and the Revolving Loan Commitments are terminated. If any amount shall be paid to any Subsidiary Guarantor on account of such subrogation rights at any time when all of the Guaranteed Obligations shall not have been paid in full or the Revolving Loan Commitments are not terminated, such amount shall be held by such Subsidiary Guarantor in trust for the Agent, segregated from other funds of such Subsidiary Guarantor, and shall, forthwith upon receipt by such Subsidiary Guarantor, be turned over to the Agent in the exact form received by such Subsidiary Guarantor (duly endorsed by such Subsidiary Guarantor to the Agent, if required) to be applied against the Guaranteed Obligations, whether matured or unmatured, in such order as set forth in the Loan Agreement.

SECTION 2.4 Nature of Subsidiary Guaranty .

(a) Each Subsidiary Guarantor agrees that this Subsidiary Guaranty is a continuing, unconditional guaranty of payment and performance and not of collection, and that its obligations under this Subsidiary Guaranty shall be primary, absolute and unconditional, irrespective of, and unaffected by:

(i) the genuineness, validity, regularity, enforceability or any future amendment of, or change in, the Loan Agreement or any other Loan Document or any other agreement, document or instrument to which the Borrower or any Subsidiary Guarantor is or may become a party;

(ii) the absence of any action to enforce this Subsidiary Guaranty, the Loan Agreement or any other Loan Document or the waiver or consent by the Agent or any Secured Party with respect to any of the provisions of this Subsidiary Guaranty, the Loan Agreement or any other Loan Document;

5

(iii) the existence, value or condition of, or failure to perfect its Lien against, any security for or other guaranty of the Guaranteed Obligations or any action, or the absence of any action, by the Agent or any Secured Party in respect of such security or guaranty (including, without limitation, the release of any such security or guaranty); or

(iv) any other action or circumstances which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor;

it being agreed by each Subsidiary Guarantor that, subject to the first sentence of Section 2.2 , its obligations under this Subsidiary Guaranty shall not be discharged until the final indefeasible payment and performance, in full, of all of the Guaranteed Obligations and the termination of the Revolving Loan Commitments.

(b) Each Subsidiary Guarantor represents, warrants and agrees that its obligations under this Subsidiary Guaranty are not and shall not be subject to any counterclaims, offsets or defenses of any kind (other than the defense of payment) against the Agent, any Secured Party or the Borrower whether now existing or which may arise in the future.

(c) Each Subsidiary Guarantor hereby agrees and acknowledges that the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Subsidiary Guaranty, and all dealings between the Borrower and any of the Subsidiary Guarantors, on the one hand, and the Agent and the Secured Parties, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this Subsidiary Guaranty.

SECTION 2.5 Waivers . To the extent permitted by law, each Subsidiary Guarantor expressly waives all of the following rights and defenses (and agrees not to take advantage of or assert any such right or defense):

(a) any rights it may now or in the future have under any statute, or at law or in equity, or otherwise, to compel the Agent or any Lender to proceed in respect of the Guaranteed Obligations against the Borrower or any other Person or against any security for or other guaranty of the payment and performance of the Guaranteed Obligations before proceeding against, or as a condition to proceeding against, such Subsidiary Guarantor;

(b) any defense based upon the failure of the Agent or any Secured Party to commence an action in respect of the Guaranteed Obligations against the Borrower, any of the other Subsidiary Guarantors, the Parent, any other guarantor of the Guaranteed Obligations or any other Person or any security for the payment and performance of the Guaranteed Obligations;

(c) any right to insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshalling of assets or