If I sign a Development Agreement with Carls, what qualified individual must I designate and have approved?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
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ITEM 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS
You are not obligated to participate personally in the direct operation of the Franchised Restaurant; however, you must designate, and we must approve, a qualified individual to serve as the "Operating Principal" of your Franchised Restaurant. If you sign a Development Agreement, you must designate, and we must approve, a qualified individual to serve as your "Development Principal."
The Operating Principal must own at least a 10% equity ownership interest in you, or in your general partner if you are a limited partnership, unless modified by us in our sole discretion, and be a person acceptable to both us and you. (This requirement does not apply if you were 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 you and us.) The Operating Principal must be a member of the Continuity Group and have full control over the day-to-day activities of the Franchised Restaurant and those other restaurants (that are franchised by us or our affiliates) operated by you in the same geographic market as the Franchised Restaurant, including control over the standards of operation and financial performance. Unless you have named, and we have approved, a Multi-Unit Manager (discussed below), the Operating Principal must: (1) devote full time and best efforts to the supervision and conduct of the Franchised Restaurant and those other restaurants (that are franchised by us or our affiliates) operated by you in the same geographic market as the Franchised Restaurant; and (2) maintain his/her primary residence within a reasonable driving distance of the Franchised Restaurant, unless waived in writing by us. The Operating Principal will be required to successfully complete the FMTP and any additional training required by us. If you operate restaurants in multiple markets that are franchised by us or our affiliates, an individual meeting the above qualifications will serve as the Operating Principal in at least one market.
If you operate restaurants that are franchised by us or our affiliates in multiple geographic markets, for all markets in which the Operating Principal fails to satisfy our requirements, you must designate and retain an individual to serve as Multi-Unit Manager.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 59–61)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, if you sign a Development Agreement, you must designate and have Carls approve a qualified individual to serve as your "Development Principal." This individual must own at least a 10% equity ownership interest in you, or in your general partner if you are a limited partnership, unless Carls modifies this requirement at their discretion. This equity ownership requirement does not apply if you were 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 you and Carls.
The Development Principal must be a member of the Continuity Group and have full control over the day-to-day development of the Franchised Restaurants. Unless you have named and Carls has approved a Multi-Unit Development Manager, the Development Principal must devote full time and best efforts to supervising the development of the Franchised Restaurants and maintain his/her primary residence within a reasonable driving distance of the Development Territory, unless waived in writing by Carls. The Development Principal will be required to successfully complete Carls's development training and any additional training required by them.
If you are developing restaurants in multiple markets franchised by Carls or its affiliates, an individual meeting the above qualifications will serve as the Development Principal in at least one market. If the Development Principal fails to meet Carls's requirements in all markets, you must designate and retain a Multi-Unit Development Manager, who will be under the supervision of the Development Principal. This manager must devote full time and best efforts to supervising the development of the Franchised Restaurants and other restaurants that are to be operated by you that are franchised by Carls in a geographic market, successfully complete Carls's development training, the FMTP, and any additional training required by Carls, and be approved by Carls. The Multi-Unit Development Manager must also maintain his/her primary residence within a reasonable driving distance of the Development Territory, unless waived in writing by Carls.