What information must a Carls Developer provide to CJR when proposing a transfer?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
- B. Developer shall advise CJR in writing of any proposed Transfer, submit (or cause the proposed transferee to submit) a franchise application for the proposed transferee, submit a copy of all contracts and all other agreements or proposals and submit all other information requested by CJR relating to the proposed Transfer.
If CJR does not exercise its right of first refusal pursuant to Section 10.J., the decision as to whether or not to consent to a proposed Transfer shall be made by CJR in its sole discretion and shall include numerous factors deemed relevant by CJR.
These factors may include, but will not be limited to, the following:
(1) The proposed transferee (and if the proposed transferee is not a natural person, all persons that have any direct or indirect interest in the transferee as CJR may require) must demonstrate to CJR's satisfaction that it has extensive experience in high quality restaurant operations of a character and complexity similar to the restaurants franchised by CJR or its affiliates; must meet the managerial, operational, experience, quality, character and business standards for a developer promulgated by CJR from time to time; must possess a good character, business reputation and credit rating; must have an organization whose management culture is compatible with CJR's management culture; and must have adequate financial resources and working capital, as determined by CJR in its sole discretion, to meet Developer's development obligations under this Agreement.
(2) The sales price shall not be so high, in CJR's reasonable judgment, as to jeopardize the ability of the transferee to develop, maintain, operate and promote the Franchised Restaurants and meet financial obligations to CJR, third party suppliers and creditors.
CJR's decision with respect to a proposed Transfer shall not create any liability on the part of CJR: (a) to the transferee, if CJR consents to the Transfer and the transferee experiences financial difficulties; or (b) to Developer or the proposed transferee, if CJR withholds consent to the Transfer.
CJR, without any liability to Developer or the proposed transferee, has the right, in its sole discretion, to communicate and counsel with Developer and the proposed transferee regarding any aspect of the proposed Transfer.
Source: Item 23 — RECEIPTS (FDD pages 80–480)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, a Developer must inform CJR in writing about any proposed transfer. The Developer must submit a franchise application for the proposed transferee, along with copies of all contracts, agreements, proposals, and any other information CJR requests regarding the transfer.
Carls maintains the right of first refusal, allowing them to purchase the interest being transferred under the same terms offered by a third party. If CJR waives this right, they still have the sole discretion to approve or deny the transfer based on various factors. These factors include the transferee's experience in high-quality restaurant operations, their managerial and operational standards, character, business reputation, credit rating, management culture, and adequate financial resources.
CJR also considers whether the sales price jeopardizes the transferee's ability to develop, operate, and promote the Franchised Restaurants or meet financial obligations to CJR, third-party suppliers, and creditors. This comprehensive review ensures that any transfer aligns with Carls's standards and protects the brand's interests.
Prospective franchisees should note that Carls's consent to a transfer does not create any liability for CJR, either to the transferee if they experience financial difficulties or to the Developer if consent is withheld. CJR has the right to communicate and counsel with both the Developer and the proposed transferee regarding the transfer, without incurring any liability.