factual

Must a Carls franchisee comply with data privacy laws when handling Consumer Information?

Carls Franchise · 2024 FDD

Answer from 2024 FDD Document

rvices only through CJR's designated providers to customers in Franchisee's market. On or before the Opening Date of the Franchised Restaurant opens, Franchisee agrees to enter into the OLO Authorized Operator Agreement with Olo, Inc. Franchisee further agrees to enter into any participation agreement required with CJR's designated delivery providers at the same time (currently, the approved delivery providers are Uber Eats, Door Dash, and GrubHub). Unless CJR provides its prior written consent, Franchisee agrees that it will not provide its own delivery service or use its employees to deliver orders to Franchisee's customers.

O. Customer Satisfaction Programs

In order to (among other things) maintain and enhance the goodwill associated with the Proprietary Marks, the System and each Carl's Jr. Restaurant, Franchisee agrees to participate in programs initiated to verify customer satisfaction and/or Franchisee's compliance with all operational and other aspects of the System, including (but not limited to) secret shoppers, customer survey, or other Quality Assurance ("QA") or similar programs as CJR may require. CJR will share the results of these programs, as they pertain to the Franchised Restaurant, with Franchisee. Franchisee will reimburse CJR for all costs related to the Franchised Restaurant associated with any and all of these programs.

P. Consumer Information

Franchisee may only use Consumer Information (as defined below) to the extent necessary to perform Franchisee's obligations under this Agreement during the term hereof and subject to such instructions and restrictions as CJR may from time to time impose and in compliance with all data privacy, security and other applicable laws. "Consumer Information" means any identifiers (including name, address, phone numbers, usernames, birthdates and e-mail addresses), sales, transaction, loyalty and payment history, and all other information about or related to any customer or prospective customer, including any information deemed "personal information" or "personal data" under applicable law. As used in this Agreement, the term "customer" refers to any person or entity (i) whose information is collected by

any CJR system or application or included in any consumer or customer database, file or system owned or controlled by CJR, its parent, subsidiary or affiliate companies; (ii) who is included on any marketing or customer lists Franchisee develops or uses or any customer information generally collected and saved for any reason; (iii) who has purchased, purchases or intends to purchase products or services online, through an CJR application, or at the Franchised Restaurant; or (iv) who has been solicited to purchase any products or services at the Franchised Restaurant. CJR may use the Consumer Information as CJR deems appropriate, including sharing it with CJR's affiliates.

CJR owns all Consumer Information and may use the Consumer Information as it deems appropriate (subject to applicable law), including disclosing it to vendors or sharing it with its affiliates for cross-marketing or other purposes. Franchisee may only use Consumer Information for the purpose of operating the Franchised Restaurant to the extent permitted under this Agreement, including the OPM, during the term hereof and subject to such restrictions as CJR may from time to time impose and in compliance with all data privacy, security and other applicable laws. Without limiting the foregoing, Franchisee agrees to comply with applicable law in connection with Franchisee's collection, processing, storage and use of such Consumer Information, including, if required under applicable law, obtaining consents from individuals for CJR's and its affiliates' use of the Consumer Information. Franchisee must comply with all laws and regulations relating to data protection, privacy and security, including data breach response requirements ("Privacy Law(s)"), as well as data privacy and security policies, procedures and other requirements CJR may periodically establish. Franchisee must maintain reasonable, appropriate, and effective security controls to preserve the security, integrity, availability, confidentiality, and resilience of Consumer Information. Franchisee must notify CJR immediately of any suspected data breach at or in connection with the Franchised Restaurant or the business operated at the Franchised Restaurant. Franchisee must fully cooperate with CJR and its counsel in determining the most effective way to meet CJR's standards and policies pertaining to Privacy Laws, including those governing notification of a data breach. Franchisee is responsible for any financial losses it incurs or remedial actions that it must take as a result of breach of security or unauthorized access to Consumer Information in Franchisee's control or possession.

Without limiting the foregoing, Franchisee represents, warrants, and covenants that:

  • (1) Franchisee will not "sell" or "share" (as defined under any Privacy Law) any Consumer Information or make Consumer Information available to any third party for valuable consideration;
  • (2) Franchisee will retain, use, or disclose Consumer Information only for the specific business purposes specified in this Agreement, and not for any other commercial or noncommercial purpose;
  • (3) Franchisee will not retain, use, or disclose Consumer Information outside of the direct business relationship between Franchisee and CJR;
  • (4) Franchisee will not combine Consumer Information received from or on behalf of CJR with personal information received from another source or collected from Franchisee's interactions with a consumer outside the operation of the Franchised Restaurant, except as specifically allowed under applicable Privacy Law;
  • (5) Franchisee shall not allow any person or entity (other than Franchisee's direct employees) to process Consumer Information without the express prior approval of CJR, and any such subcontracting shall be performed strictly in accordance with a written agreement that imposes obligations on such subcontractor that are at least as restrictive as those imposed on Franchisee under this Agreement. Franchisee shall be liable for the acts and omissions of all such

subcontractors to the same extent Franchisee would be liable if performing the services of each subcontractor directly under the Agreement;

Source: Item 22 — CONTRACTS (FDD page 80)

What This Means (2024 FDD)

According to the 2024 Carls FDD, a franchisee must comply with all data privacy, security, and other applicable laws when using Consumer Information. Consumer Information includes identifiers like names, addresses, phone numbers, usernames, birthdates, email addresses, sales, transaction, loyalty and payment history, and any other information related to customers or prospective customers. Carls may use this Consumer Information as it sees fit, including sharing it with affiliates.

The franchisee's use of Consumer Information is restricted to operating the franchised restaurant and must adhere to any limitations imposed by Carls. This includes obtaining consents from individuals for Carls and its affiliates to use their Consumer Information, if required by law. Franchisees must also follow Carls' data privacy and security policies and maintain security controls to protect Consumer Information.

Furthermore, franchisees are obligated to notify Carls immediately of any suspected data breaches and cooperate in determining the best way to address the situation. The franchisee is responsible for any financial losses or remedial actions resulting from security breaches or unauthorized access to Consumer Information under their control. If a franchisee receives a consumer request directly, they must inform Carls within one business day and cooperate to ensure a timely response. Carls will also inform the franchisee of any consumer request that requires the franchisee's compliance and provide the necessary information within its possession.

Carls can audit the franchisee's compliance with these obligations, potentially through manual reviews, automated scans, and technical testing, at least once every twelve months. Franchisees must also utilize administrative, physical, and technical safeguards designed to protect systems and data from unauthorized access, disclosure, acquisition, destruction, use, or modification that are consistent with industry standards and best practices. Franchisees must adhere to any applicable law relating to data security. These measures ensure that Carls protects consumer data and complies with privacy regulations.

Disclaimer: This information is extracted from the 2024 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.