What is the Development Fee for each Carls Franchised Restaurant that I agree to develop under a Development Agreement?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
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Other than these six actions, no litigation is required to be disclosed in this Item.
ITEM 4 BANKRUPTCY
No bankruptcy is required to be disclosed in this Item.
ITEM 5 INITIAL FEES
Development Fee
If you enter into a Development Agreement, you must pay CJR a Development Fee of $10,000 for each Franchised Restaurant you agree to develop at the time you sign the Agreement. The Development Fee is not refundable. If you execute a Franchise Agreement for a new Franchised Restaurant pursuant to the Development Agreement, the $10,000 Development Fee associated with this new Franchised Restaurant will be credited against the Initial Franchise Fee for such Franchised Restaurant.
Source: Item 5 — INITIAL FEES (FDD pages 24–26)
What This Means (2024 FDD)
According to the 2024 FDD, if you sign a Development Agreement with Carls, you must pay a Development Fee of $10,000 for each franchised restaurant you commit to developing. This fee is due when you sign the Development Agreement and is non-refundable.
The Development Fee is credited towards the Initial Franchise Fee if you proceed to open a Carls restaurant under the Development Agreement. The Initial Franchise Fee is $25,000, but it is reduced to $15,000 for restaurants developed under a Development Agreement. Therefore, the $10,000 Development Fee effectively covers this reduction, meaning you pay the balance of $15,000 when you execute the Franchise Agreement.
In summary, while the initial Development Fee is $10,000 per restaurant, it functions as a deposit that is later applied to the Initial Franchise Fee, lowering the amount due upon signing the Franchise Agreement. This structure is common in franchising, incentivizing developers to commit to multiple locations while providing some initial capital to the franchisor.