What are the conditions that must be met before a developer can commence construction at an Authorized Site for a Carls franchise?

According to Carls's 2024 Franchise Disclosure Document, a developer may not commence construction at an Authorized Site until they have met two specific conditions. First, the developer must have received a fully-executed Franchise Agreement from Carls. Second, the developer must have paid Carls the Initial Franchise Fee. These requirements are designed to ensure that the franchisee is fully committed to the Carls system and that all necessary agreements and payments are in place before construction begins.

This stipulation protects Carls by ensuring that only franchisees who have finalized their agreement and paid the initial fee proceed with construction. It also protects the franchisee by ensuring they have a fully executed agreement in place before investing in construction. This is a fairly standard practice in franchising, as it formalizes the relationship and financial commitment before significant investments are made.

Failure to meet these conditions can have serious consequences. According to the FDD, Carls has the right to terminate the Development Agreement if the developer begins construction before fulfilling these requirements. This underscores the importance of adhering strictly to the outlined procedures to avoid potential loss of development rights and investments.