What actions related to reports or dealings with CJR would constitute a default by a Carls developer?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
(10) Developer knowingly falsifies any report required to be furnished CJR or makes any material misrepresentation in its dealings with CJR or fails to disclose any material facts to CJR.
(12) Developer, the Development Principal, any member of the Continuity Group, any 10% Owner or any Affiliated Entity remains in default beyond the applicable cure period: (a) under any other agreement with CJR or its affiliates; (b) under any real estate lease, equipment lease, or financing instrument relating to a Franchised Restaurant; or (c) with any vendor or supplier to a Franchised Restaurant; provided that if the default is not by Developer, Developer is given written notice of the default and 30 days to cure said default.
(13) Developer fails or refuses to comply with any other provision of this Agreement or any requirement of the Carl's Jr. System and does not correct the failure or refusal within 30 days (10 days for monetary defaults) after receiving written notice of default. Except for monetary defaults, if the default cannot be corrected within 30 days, Developer shall have such additional time to correct the default as reasonably required (not to exceed 90 days) provided that Developer begins taking the actions necessary to correct the default during the 30-day cure period and diligently and in good faith pursues those actions to completion.
If Developer has received 2 or more notices of default pursuant to this Section 13.A.(13) within the previous 12 months, CJR shall be entitled to send Developer a notice of termination upon Developer's next default under this Section 13.A.(13) in that 12-month period without providing Developer an opportunity to remedy that default.
Source: Item 23 — RECEIPTS (FDD pages 80–480)
What This Means (2024 FDD)
According to the 2024 Carls Franchise Disclosure Document, a developer can be in default for actions related to reports or dealings with CJR. Specifically, if a developer knowingly falsifies any report required to be furnished to CJR, makes any material misrepresentation in its dealings with CJR, or fails to disclose any material facts to CJR, it would constitute a default.
This means that Carls franchisees must ensure the accuracy and completeness of all information provided to the franchisor, whether in formal reports or during any interactions. Any attempt to mislead or withhold information from Carls could have serious consequences, including termination of the franchise agreement. This requirement underscores the importance of transparency and honesty in the franchisee-franchisor relationship.
Carls also stipulates that if a developer remains in default beyond the applicable cure period under any agreement with CJR or its affiliates, it would constitute a default. Furthermore, if a developer fails to comply with any provision of the agreement or any requirement of the Carls system and does not correct the failure within 30 days after receiving written notice of default (10 days for monetary defaults), it would also be considered a default. For non-monetary defaults that cannot be corrected within 30 days, the developer has additional time, not exceeding 90 days, provided they begin corrective actions during the initial 30-day period and diligently pursue them to completion.
Carls notes that if a developer has received two or more notices of default within a 12-month period, CJR is entitled to send a notice of termination upon the developer's next default within that same 12-month period, without providing an opportunity to remedy the default. This highlights the importance of addressing and correcting any issues promptly to avoid repeated defaults and potential termination.