For Carls franchises, what minimum equity ownership interest in the Developer is required for the Development Principal, and are there any exceptions to this requirement?

According to the 2024 FDD, Carls requires the Development Principal to maintain a minimum equity ownership in the Developer entity. Specifically, the Development Principal must have at least a 10% equity ownership interest in the Developer. If the Developer is a limited partnership, the Development Principal must have at least a 10% equity ownership in the Developer's general partner. This ensures that the Development Principal has a vested interest in the success of the development project.

However, there is an exception to this 10% equity requirement. Carls may modify or waive this requirement at its sole discretion. Additionally, the equity requirement does not apply if the Developer was a publicly-held entity or a wholly-owned subsidiary of a publicly-held entity as of the date of the first franchise-related agreement between the Developer and Carls. This exception recognizes that publicly-held entities have different ownership structures and levels of oversight.

Even if the Development Principal meets the equity requirements, they must also be a member of the Continuity Group and have full control over the day-to-day development of the Franchised Restaurants. This ensures that the Development Principal is actively involved in the development process and has the authority to make decisions. Prospective Carls franchisees should confirm with Carls whether the 10% equity requirement applies to their specific situation, and what documentation is needed to demonstrate compliance.