If CJR successfully sues a Carls franchisee for non-compliance with the franchise agreement, is the franchisee required to reimburse CJR for legal costs, including in-house counsel fees?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
If CJR utilizes legal counsel (including in-house counsel employed by CJR) in connection with any failure by Franchisee to comply with this Agreement, Franchisee shall reimburse CJR for any of the above-listed costs and expenses incurred by CJR.
In any judicial proceeding, the amount of these costs and expenses will be determined by the court and not by a jury.
H. Collection Costs and Expenses
Franchisee agrees to pay to CJR on demand any and all costs and expenses incurred by CJR in enforcing the terms of this Agreement, including, without limitation, collecting any monies owed by Franchisee to CJR. These costs and expenses include, but are not limited to, costs and commissions due a collection agency, reasonable attorneys' fees (including attorneys' fees for in-house counsel employed by CJR or its affiliates and any attorneys' fees incurred by CJR in bankruptcy proceedings), costs incurred in creating or replicating reports demonstrating Gross Sales of the Franchised Restaurant, court costs, expert witness fees, discovery costs and reasonable attorneys' fees and costs on appeal, together with interest charges on all of the foregoing.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, if CJR (Carls Jr. Restaurants) utilizes legal counsel, including in-house counsel, due to a franchisee's failure to comply with the Franchise Agreement, the franchisee is obligated to reimburse CJR for all associated costs and expenses.
These reimbursable costs and expenses include, but are not limited to, costs due to a collection agency, reasonable attorneys' fees (encompassing fees for both outside and in-house counsel), costs for creating reports demonstrating the franchised restaurant's gross sales, court costs, expert witness fees, discovery costs, and reasonable attorneys' fees and costs on appeal, along with interest charges on these amounts. The determination of the amount of these costs and expenses will be made by the court in any judicial proceeding, not by a jury.
This means that a Carls franchisee found in non-compliance could face significant financial burdens beyond the initial damages or penalties. They would be responsible for covering Carls's legal expenses, potentially including the salaries and costs associated with Carls's in-house legal team. This provision highlights the importance of adhering to the franchise agreement and the potential financial risks of non-compliance.