How does Carls contribute to the Production Fund, and is it the same as franchisees?

According to Carls's 2024 Franchise Disclosure Document, franchisees are obligated to contribute to the Production Fund, with the specific amount detailed in Appendix C and potentially modified as per Section 8.F. Carls, including its affiliated restaurants, also contributes to the Production Fund. The FDD states that Carls's contribution is made on the same basis as comparable franchisees, ensuring that company-operated restaurants contribute to the fund in a manner consistent with franchised locations.

This arrangement ensures that both franchisees and Carls share the financial responsibility for the creation and development of advertising, marketing, social media, public relations, research, gift card programs, and loyalty programs. The contributions are intended to support the overall promotion and recognition of the Carls Jr. brand. The funds are managed at Carls's discretion, allowing them to direct advertising and marketing efforts as they see fit.

For a prospective franchisee, this means that they will be contributing to a common fund that supports the brand's marketing efforts. It also suggests that Carls is invested in the success of the advertising and marketing programs, as they contribute to the fund on the same basis as franchisees. However, franchisees should review Appendix C to understand the specific contribution amount and Section 8.F to understand how these amounts may be modified over time.

It is important to note that while Carls contributes to the Production Fund on the same basis as franchisees, Carls retains sole discretion over the fund's management and the execution of advertising and marketing programs. Franchisees are obligated to participate in these programs, but they do not have direct control over how the funds are spent. This arrangement is typical in franchising, where the franchisor manages marketing efforts to maintain brand consistency and maximize impact.