What happens if a Carls developer begins construction before a fully-executed Franchise Agreement is in place and the Initial Franchise Fee is paid?

According to Carls's 2024 Franchise Disclosure Document, if a developer begins construction of a franchised restaurant at a site before receiving a fully-executed Franchise Agreement and paying the Initial Franchise Fee, Carls has grounds to terminate the Development Agreement. This termination can occur with written notice to the developer, and there is no opportunity to cure the breach.

This provision underscores the importance of adhering to Carls's established procedures and timelines. Starting construction prematurely represents a significant breach of the Development Agreement, giving Carls the right to terminate the agreement without allowing the developer to rectify the situation. The Initial Franchise Fee for each Franchised Restaurant is $25,000.

For a prospective Carls developer, this means that all necessary agreements and payments must be finalized before any physical construction begins at the site. Failing to comply with this requirement can result in the immediate termination of the Development Agreement, leading to a loss of investment and development rights. This policy protects Carls by ensuring that developers are fully committed and have met all contractual obligations before commencing construction, safeguarding the brand's standards and reputation.

It is essential for developers to maintain open communication with Carls and ensure that all administrative and financial requirements are met before initiating any construction activities. This proactive approach will help avoid potential breaches of the Development Agreement and maintain a positive working relationship with Carls.