What is the consequence if a Developer attempts to transfer any interest in the Carls Development Agreement without CJR's written consent?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
Accordingly, neither Developer nor any immediate or remote successor to any part of Developer's interest in this Agreement, nor any individual, partnership, corporation or other legal entity which directly or indirectly has an interest in Developer shall sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any direct or indirect interest in Developer, this Agreement or any other assets pertaining to Developer's operations under this Agreement (collectively "Transfer") without the prior written consent of CJR. CJR shall be free to withhold consent to any Transfer, without consideration of the factors listed in Section 10.B., if Developer does not propose to Transfer the same interest with respect to all agreements with CJR in the Development Territory.
Except as otherwise provided in this Agreement, any purported Transfer, by operation of law or otherwise, not having the prior written consent of CJR shall be null and void and shall constitute a material
CJR TR Development Agreement – 5/24 Franchisee (Alpha Code) DMA/Area of Development – Number of Restaurants
breach of this Agreement, for which CJR may terminate this Agreement without providing Developer an opportunity to cure the breach.
Source: Item 23 — RECEIPTS (FDD pages 80–480)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, if a Developer attempts to transfer any interest in the Development Agreement without obtaining prior written consent from CJR, the purported transfer will be considered null and void. Furthermore, such an unauthorized transfer constitutes a material breach of the Development Agreement. As a result of this breach, CJR has the right to terminate the Development Agreement without providing the Developer an opportunity to remedy the breach.
This provision underscores the importance Carls places on the personal qualifications and commitment of its Developers. The agreement is based on the Developer's business skills, financial capacity, character, experience, and ability to operate high-quality foodservice operations. Requiring consent for transfers ensures that any new party involved meets Carls's standards and can uphold the brand's reputation and operational requirements.
For a prospective Carls franchisee, this means that exiting the agreement or changing ownership is not a simple matter. It requires careful adherence to the transfer provisions outlined in the Development Agreement and obtaining explicit approval from Carls. Failure to do so can lead to the immediate termination of the agreement, resulting in a significant loss of investment and business opportunity.