Must the franchisee advise CJR in writing of any proposed Carls franchise transfer?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
B. Franchisee shall advise CJR in writing of any proposed Transfer, submit (or cause the proposed transferee to submit) a franchise application for the proposed transferee, submit a copy of all
contracts and all other agreements or proposals and submit all other information requested by CJR relating to the proposed Transfer. If CJR does not exercise its right of first refusal pursuant to Section 18.J., the decision as to whether or not to consent to a proposed Transfer shall be made by CJR in its sole discretion and shall include numerous factors deemed relevant by CJR. These factors may include, but will not be limited to, the following:
- (1) The proposed transferee (and if the proposed transferee is not a natural person, all persons that have any direct or indirect interest in the transferee as CJR may require) must demonstrate to CJR's satisfaction extensive experience in high quality restaurant operations of a character and complexity similar to Carl's Jr.
Restaurants; must meet the managerial, operational, experience, quality, character and business standards for a franchisee promulgated by CJR from time to time; must possess a good character, business reputation and credit rating; must have an organization whose management culture is compatible with CJR's management culture; and must have adequate financial resources and working capital, as determined by CJR in its sole discretion, to meet Franchisee's obligations under this Agreement.
- (2) If the Transfer is a sale, the sales price shall not be so high, in CJR's reasonable judgment, as to jeopardize the ability of the transferee to develop, maintain, operate and promote the Franchised Restaurant and meet financial obligations to CJR, third party suppliers and creditors.
CJR's decision with respect to a proposed Transfer shall not create any liability on the part of CJR: (a) to the transferee, if CJR consents to the Transfer and the transferee experiences financial difficulties; or (b) to Franchisee or the proposed transferee, if CJR withholds consent to the Transfer.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, a franchisee is required to inform CJR (Carls Jr. Restaurants) in writing of any proposed transfer of the franchise. This notification must include a franchise application from the proposed transferee, copies of all contracts and agreements related to the transfer, and any other information CJR requests regarding the proposed transfer.
This requirement ensures that Carls maintains control over who becomes a franchisee within their system. CJR has the right to evaluate the proposed transferee based on several factors, including their experience in high-quality restaurant operations, managerial and operational standards, character, business reputation, credit rating, management culture, and financial resources. Carls also assesses whether the sales price of the transfer is reasonable enough to allow the transferee to successfully operate the franchise and meet their financial obligations.
Carls's decision on the proposed transfer does not create any liability for them, either to the transferee if they experience financial difficulties after the transfer or to the franchisee or proposed transferee if Carls withholds consent. This protects Carls from potential legal claims related to the success or failure of the transferred franchise. The franchisee needs to be aware of these conditions and ensure that any potential buyer meets Carls's criteria to avoid the transfer being rejected.