factual

What aspects of the Carls development agreement are covered under the 'Obligations on Termination or Expiration' section, and on what page can I find this information?

Carls Franchise · 2024 FDD

Answer from 2024 FDD Document

14. OBLIGATIONS ON TERMINATION OR EXPIRATION

Upon termination or expiration of this Agreement:

  • A. Developer shall have no further right to develop or open Franchised Restaurants in the Development Territory, except that Developer shall be entitled to complete and open a Franchised Restaurant for which a Franchise Agreement has been fully executed. Termination or expiration of this Agreement shall not affect Developer's right to continue to operate Franchised Restaurants that were open and operating as of the date this Agreement terminated or expired.
  • B. The limited exclusive rights granted Developer in the Development Territory shall terminate and CJR shall have the right to operate or license others to operate Carl's Jr. Restaurants anywhere in the Development Territory.
  • C. Developer promptly shall return to CJR all materials and information furnished by CJR or its affiliates, except materials and information furnished with respect to a Franchised Restaurant under development for which there is an effective Franchise Agreement or a Franchised Restaurant which is open and operating pursuant to an effective Franchise Agreement.
  • D. Developer and all persons and entities subject to the covenants contained in Section 12 shall continue to abide by those covenants and shall not, directly or indirectly, take any action that violates those covenants.
  • E. Developer immediately shall pay CJR and its affiliates all sums due and owing CJR or its affiliates pursuant to this Agreement.
  • F. CJR shall retain the Development Fee, including any remaining (unused) balance on account with CJR.
  • G. Developer shall furnish CJR, within 30 days after the effective date of termination or expiration, evidence (certified to be true, complete, accurate and correct by an authorized officer of Developer) satisfactory to CJR of Developer's compliance with Sections 14.A. through 14.E.
  • H. Developer shall not, except with respect to a restaurant franchised by CJR or its affiliates which is then open and operating pursuant to an effective franchise agreement or a restaurant under construction that is franchised by CJR or its affiliates for which there is an effective franchise agreement: (1) operate or do business under any name or in any manner that might tend to give the public the impression that Developer is connected in any way with CJR or its affiliates or has any right to use the Carl's Jr. System or any of the Proprietary Marks; (2) make, use or avail itself of any of the materials or information furnished or disclosed by CJR or its affiliates under this Agreement or disclose or reveal any such materials or information or any portion thereof to anyone else; or (3) assist anyone not licensed by CJR or its affiliates to construct or equip a foodservice outlet substantially similar to a Carl's Jr. Restaurant.

CJR TR Development Agreement – 5/24 Franchisee (Alpha Code)

DMA/Area of Development – Number of Restaurants

Source: Item 23 — RECEIPTS (FDD pages 80–480)

What This Means (2024 FDD)

According to the 2024 Carls Franchise Disclosure Document, section 14 outlines the obligations upon termination or expiration of the development agreement. This section specifies several key aspects.

First, the developer's rights to develop or open new franchised restaurants in the designated territory cease, except for restaurants already under a fully executed Franchise Agreement. However, the developer retains the right to continue operating existing franchised restaurants. Second, the exclusive rights granted to the developer in the territory terminate, allowing Carls to operate or license others in the same area. Third, the developer must return all materials and information provided by Carls, excluding those related to restaurants with effective franchise agreements or those already operating.

Additionally, the developer and related parties must continue to adhere to non-compete covenants outlined in Section 12 of the agreement. The developer is also required to settle all outstanding payments to Carls and its affiliates, and Carls retains the development fee. The developer must provide evidence of compliance with these obligations within 30 days of termination or expiration. Finally, the developer is restricted from actions that might imply a connection with Carls, using provided materials, or assisting unlicensed parties in establishing similar foodservice outlets. This information can be found on page 110 of the CJR TR Development Agreement.

Disclaimer: This information is extracted from the 2024 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.