In a Carls franchise transfer, who is responsible for paying tax liabilities incurred in connection with the operation of the Franchised Restaurant prior to Closing?

According to Carls's 2024 Franchise Disclosure Document, in the event of a franchise transfer, the franchisee is responsible for paying all tax liabilities incurred in connection with the operation of the franchised restaurant prior to the closing date. This means that the franchisee must settle all outstanding tax obligations before the transfer of ownership is finalized.

Additionally, Carls has the right to offset and reduce the purchase price by any amounts owed by the franchisee to Carls. This also includes any encumbrances or liens against the assets or any obligations assumed by Carls. This provision protects Carls from assuming any unexpected financial burdens related to the restaurant's prior operation.

Prior to the closing, both the franchisee and Carls must comply with all applicable legal requirements, including the bulk sales provisions of the Uniform Commercial Code and any applicable tax laws and regulations. This ensures that the transfer is conducted in accordance with all relevant legal and financial standards. A prospective franchisee should consult with a financial advisor to fully understand the tax implications and ensure compliance during a franchise transfer.