How does the Carls's Development Fee in Item 5 relate to the franchisee's obligation to develop restaurants within a specific timeframe, as potentially outlined in Item 9?

According to the 2024 FDD, Item 9 outlines the franchisee's obligations under both the Franchise Agreement (FA) and the Development Agreement (DA). Specifically, it references 'Territorial development and sales quotas' and cites 'DA: Sections 1-3 & Appendix A-B' and 'Item 12'. This indicates that the Development Agreement includes details about the franchisee's obligations to develop the territory according to a set schedule or quota.

Item 9 also lists 'Fees' as an obligation, referencing 'FA: Sections 3, 5, 8 & Appendix A-C' and 'DA: Section 4', and links this to 'Items 5 & 6' of the disclosure document. This suggests that the fees outlined in Item 5, such as the Development Fee, are directly related to the franchisee's obligations under the Development Agreement, including the territorial development and sales quotas. The Development Fee may be tied to the rights granted to develop a specific territory within a specific timeframe.

While the excerpts provided do not explicitly state the consequences of failing to meet the development schedule, the relationship between the Development Fee and the development obligations implies that failure to adhere to the schedule could result in penalties or loss of development rights. A prospective Carls franchisee should carefully review the Development Agreement, specifically Sections 1-3 and Appendix A-B, as well as Item 12 of the FDD, to understand the specific terms and conditions related to the development schedule and the potential impact on the Development Fee. It is also important to clarify with Carls the exact ramifications of not meeting the development timeline outlined in the agreement.