How does the Carls Development Agreement territory described in Item 12 affect the franchisee's obligations related to site selection in Item 9?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
You will not receive an exclusive territory under the Development Agreement. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control.
If you sign a Development Agreement, you will receive a Development Territory, which will be mutually agreed upon by CJR and you, taking into consideration the density of the area and the number of Franchised Restaurants you agree to develop. A description of the Development Territory will be attached as an appendix to the Development Agreement. The perimeters of the Development Territory may be described by specific street boundaries, county lines, state lines, municipal boundaries, railroad tracks or other similar boundary descriptions, and the size may range from a portion of a metropolitan area to a county or a state in less densely populated areas. You must obtain our prior written acceptance of each site for a Franchised Restaurant, which will be based on our then-current standards for sites for Carl's Jr.
What This Means (2024 FDD)
According to the 2024 FDD, Item 12 and Item 9 of the Carls Franchise Disclosure Document outline how the Development Agreement territory affects a franchisee's site selection obligations. Item 9 generally refers to the franchisee's obligations, including site selection, as detailed in the Franchise Agreement and Development Agreement. Item 12 specifies that franchisees do not receive an exclusive territory under the Development Agreement and may face competition from other franchisees or company-owned outlets.
Under a Development Agreement with Carls, the franchisee will receive a Development Territory that is mutually agreed upon, considering the area's density and the number of restaurants the franchisee commits to developing. The territory's boundaries can be defined by streets, county lines, or other similar descriptions, ranging from a portion of a metropolitan area to an entire county or state in less populated regions. Critically, the franchisee must obtain Carls' prior written acceptance of each proposed site, based on Carls' current site standards for Carl's Jr. restaurants.
This means that while the Development Agreement grants the franchisee the right to develop within a specific territory, Carls retains control over site selection. The franchisee's obligation, as noted in Item 9, to select and acquire/lease a site is contingent upon Carls' approval. This ensures that all new locations meet Carls' standards, but it also means that the franchisee may face delays or be forced to find alternative locations if their initial choices are not approved. Prospective franchisees should carefully consider Carls' site selection criteria and the potential for competition within their Development Territory.