Are CKE Restaurants Holdings, Inc.'s financial statements provided as a guarantee of Carls' obligations to franchisees?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
solidated statements of income, members' deficit, and cash flows for the fiscal years then ended, and the related notes to the combined consolidated financial statements. Each of the CKE Securitization Entities (other than CJR) has agreed absolutely and unconditionally to guarantee to assume our duties and obligations under the franchise agreements entered into by us, should we become unable to
perform our duties and obligations. A copy of those guarantees are attached as part of Exhibit J to this disclosure document.
Also attached as Exhibit J are the audited consolidated financial statements for CJR's indirect corporate parent, CKE Restaurants Holdings, Inc. ("CKR") (formerly known as CKE Restaurants, Inc.), which comprise (1) consolidated balance sheets as of January 29, 2024 and January 30, 2023, and the related consolidated statements of operations, comprehensive income, equity, and cash flows for the fiscal years then ended, and the related notes to the consolidated financial statements; and (2) consolidated balance sheets as of January 30, 2023 and January 31, 2022, and the related consolidated statements of operations, comprehensive income, equity, and cash flows for the fiscal years then ended, and the related notes to the consolidated financial statements. As noted in Item 1, CKR will be providing required support and services to franchisees under a Management Agreement with us. CKR's financial statements are being provided for disclosure purposes only.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to Carls' 2024 Franchise Disclosure Document, the financial statements of CKE Restaurants Holdings, Inc. (CKR) are included for informational purposes only and do not constitute a guarantee of Carls' obligations to its franchisees. While CKR provides support and services to franchisees through a Management Agreement, it is not a party to the franchise agreements signed between Carls and its franchisees. Therefore, CKR does not guarantee Carls' obligations under these agreements.
However, the FDD states that each of the CKE Securitization Entities (other than CJR) has agreed to guarantee Carls' duties and obligations under the franchise agreements should Carls become unable to perform them. Copies of these guarantees are included as part of Exhibit J to the disclosure document.
Prospective franchisees should carefully review Exhibit J of the FDD to understand the specifics of the guarantees provided by the CKE Securitization Entities. It is important to understand the scope and limitations of these guarantees, as well as the financial condition of the entities providing them. This information is crucial for assessing the level of financial security and support available to franchisees.