What conditions must be met before a franchisee can develop and open a Carls Franchised Restaurant?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
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Your receipt of this disclosure document does not mean that you will be approved as a franchisee or that you may develop or open a Franchised Restaurant. Before you may develop and open a Franchised Restaurant, CJR must approve you as a franchisee (or, if you already are a franchisee, approve you for
expansion), CJR must accept the location of your proposed Franchised Restaurant, you must attend and successfully complete CJR's franchise management training program ("FMTP") and CJR and you must sign the Franchise Agreement. Among other things, you should not acquire any interest in a site for a Franchised Restaurant until, at the earliest, you are approved by CJR as a franchisee (or, if you already are a franchisee, approved for expansion) and CJR accepts the site for your Franchised Restaurant.
Development Incentive Program. Franchisees who sign a Development Agreement or a Franchise Agreement for a new-construction Carl's Jr. Restaurant by no later than May 24, 2025, may qualify for our Carl's Jr. Restaurant 2024 Development Incentive Program (the "CJR 2024 Development Incentive Program"). Under the CJR 2024 Development Incentive Program, we will reduce the royalty fee and APO fee as set forth in Item 6 for the first three years of the franchise term. The CJR 2024 Development Incentive applies to the development of new Carl's Jr. Restaurants only. The CJR 2024 Development Incentive does not apply to: (i) relocated, remodeled, reimaged, or scrape and rebuild Carl's Jr. Restaurants, (ii) Carl's Jr. Restaurants opened and operated from non-traditional locations, and (iii) Carl's Jr. Restaurants developed in high population density areas.
To be eligible for the CJR 2024 Development Incentive Program, an existing franchise must meet the following requirements: (i) sign a Development Agreement or Franchise Agreement for the development of one or more newly-constructed Carl's Jr. Restaurant(s) by no later than May 24, 2025, (ii) franchisee must open the newly-constructed Carl's Jr. Restaurant(s) by the date(s) outlined in the corresponding Development Agreement or Franchise Agreement, (iii) franchisee may not be in default of its obligations under its existing franchise agreements or related agreements with CJR or its affiliates, (iv) franchisee must be approved for growth by CJR and its affiliates, (v) franchisee must satisfy CJR's thencurrent financial and operational requirements for new restaurant development, and (vi) franchisee and the Carl's Jr. Restaurant(s) otherwise meet the requirements of the CJR 2024 Development Incentive Program. New franchisees are also eligible to participate in the CJR Development Incentive Program provided they: (i) sign a Development Agreement or Franchise Agreement for the development of one or more newlyconstructed Carl's Jr. Restaurant(s) by no later than May 24, 2025, (ii) open the newly-constructed Carl's Jr. Restaurant(s) by the date(s) outlined in the corresponding Development Agreement or Franchise Agreement, and (iii) meet the requirements of the CJR 2024 Development Incentive Program.
If you qualify for the CJR 2024 Development Incentive Program, simultaneously with your execution of the qualifying Franchise Agreement, you will sign a CJR 2024 Development Incentive Program Addendum to the Franchise Agreement (Exhibit L), which memorializes your right to receive the development incentives described above for the applicable Franchised Restaurant.
If you sign the CJR 2024 Development Incentive Program Addendum to Franchise Agreement, you will not be entitled, with respect to the applicable Franchised Restaurant covered by the CJR 2024 Development Incentive Program, to any other incentives that have been or may be offered by us.
Licenses; Permits; Applicable Laws; and Competition. It is your sole and absolute obligation to research all applicable federal, state and local laws and regulations governing the operation of your business and to ensure that such operation does not violate any federal, state or local law or regulation.
Source: Item 1 — THE FRANCHISOR, AND ANY PARENTS, PREDECESSORS, AND AFFILIATES (FDD pages 7–19)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, several conditions must be met before a franchisee can develop and open a franchised restaurant. First, Carls must approve the prospective franchisee. If the individual is already a franchisee, Carls must approve them for expansion. Second, Carls must accept the proposed location for the franchised restaurant. Third, the franchisee must attend and successfully complete Carls's franchise management training program (FMTP). Finally, both Carls and the franchisee must sign the Franchise Agreement.
Carls stipulates that a prospective franchisee should not acquire any interest in a site for a franchised restaurant until Carls approves them as a franchisee (or approves them for expansion, if applicable) and accepts the site. Furthermore, construction cannot commence until the Franchise Agreement is fully executed.
For individuals who are not already franchisees, Carls may require them to execute a Preliminary Agreement before entering into any other agreement. This agreement ensures the confidentiality of information provided by Carls during Discovery Day. Discovery Day involves attending a 2-day meeting at Carls's offices and a CKR Restaurant, where the prospective franchisee will meet with and be evaluated by various Carls personnel. Additionally, individuals with a 10% or greater interest in the franchisee entity may be required to complete an operations overview lasting approximately 10 business days, as deemed necessary by Carls.