What is the deadline for commencing construction of the Carls Jr. Franchised Restaurant after the Property Control Date?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
Construction of the Franchised Restaurant shall commence within 6 months after the Property Control Date ("Construction Commencement Date"). Site acceptance will be deemed to have been withdrawn, without notice to Franchisee, if Franchisee fails to commence construction within that time period.
Prior to the Construction Commencement Date, Franchisee shall have: (1) eliminated or otherwise satisfied all of the conditions set forth in this Agreement; (2) paid CJR the balance, if any, of the Initial Franchise Fees required by this Agreement; (3) if not previously signed, executed this Agreement; and (4) if not previously provided, provided CJR a copy of the fully-executed lease for the Franchised Location (containing those provisions specified by CJR in accordance with Section 3) or, if Franchisee owns the Franchised Location, proof of Franchisee's ownership interest. As used in this Agreement, construction shall have commenced only after Franchisee has obtained all required permits and: (a) with respect to a free-standing Franchised Restaurant, Franchisee has begun the installation of building footings with the intent to maintain continuous construction thereafter; or (b) with respect to a non free-standing Restaurant or a Restaurant being converted from a prior use, Franchisee has begun the installation of sub-floor plumbing with the intent to maintain continuous construction thereafter.
Once construction has commenced, it shall continue uninterrupted (except for interruption by reason of events constituting Force Majeure as defined in Section 28) until completed. If events constituting Force Majeure cause a delay in the commencement of construction of the Franchised Restaurant, CJR shall proportionately extend the Opening Date for the Franchised Restaurant. Notwithstanding the occurrence of any events, except events constituting Force Majeure, construction shall be completed and the Franchised Restaurant shall be furnished, equipped and shall otherwise be ready to open for business in accordance with this Agreement not later than 18 months after the Property Control Date ("Opening Date").
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, a franchisee must commence construction of the franchised restaurant within 6 months after the Property Control Date. This date is termed the "Construction Commencement Date." Failure to begin construction within this timeframe may result in the site acceptance being withdrawn without notice to the franchisee.
Prior to this Construction Commencement Date, the franchisee must fulfill several prerequisites. These include satisfying all conditions outlined in the franchise agreement, paying any outstanding balance of the initial franchise fees, formally executing the agreement if not already done, and providing Carls with a copy of the fully-executed lease for the franchised location (containing provisions specified by Carls) or, if the franchisee owns the location, proof of ownership.
The definition of construction commencement varies depending on the type of restaurant. For a free-standing restaurant, it means beginning the installation of building footings with the intent to maintain continuous construction. For a non-free-standing restaurant or a restaurant being converted from a prior use, it involves starting the installation of sub-floor plumbing with the intent to maintain continuous construction. Once started, construction must continue without interruption, except for delays due to Force Majeure events.
While construction must start within 6 months, the restaurant must be fully ready to open no later than 18 months after the Property Control Date, barring delays due to Force Majeure. This includes completing construction, furnishing, and equipping the restaurant in accordance with the franchise agreement.