What information must a Carls franchisee provide to CJR when proposing a transfer?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
ure to perform, any obligations transferred.
18. TRANSFERS BY FRANCHISEE
A. Franchisee understands and acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that CJR has entered into this Agreement in reliance on Franchisee's (and Franchisee's direct and indirect owners') business skill, financial capacity, personal character, experience and demonstrated or purported ability in developing and operating high quality foodservice operations. Accordingly, neither Franchisee nor any immediate or remote successor to any part of Franchisee's interest in this Agreement, nor any individual, partnership, corporation or other legal entity which directly or indirectly has an interest in Franchisee shall sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any direct or indirect interest in Franchisee, this Agreement, the Franchise, the Franchised Restaurant, the assets of the Franchised Restaurant, the Franchised Location or any other assets pertaining to Franchisee's operations under this Agreement (collectively "Transfer") without the prior written consent of CJR, unless otherwise permitted by this Section.
Except as otherwise provided in this Agreement, any purported Transfer, by operation of law or otherwise, not having the prior written consent of CJR shall be null and void and shall constitute a material breach of this Agreement, for which CJR may terminate this Agreement without providing Franchisee an opportunity to cure the breach.
B. Franchisee 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 18.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 extensive experience in high quality restaurant operations of a character and complexity similar to Carl's Jr. Restaurants; must meet the managerial, operational, experience, quality, character and business standards for a franchisee 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;
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to the 2024 Carls FDD, a franchisee must inform CJR in writing when proposing a transfer. The franchisee must submit a franchise application for the proposed transferee, along with copies of all contracts, agreements, or proposals related to the transfer. Additionally, the franchisee must provide any other information CJR requests regarding the proposed transfer.
This requirement ensures that Carls maintains control over who becomes a franchisee and that the proposed transferee meets the brand's standards. CJR has the right to request extensive documentation and information to evaluate the transferee's qualifications, financial stability, and operational capabilities. This process allows Carls to protect its brand reputation and the interests of other franchisees.
Carls also evaluates several factors when considering a transfer, including the transferee's experience in high-quality restaurant operations, managerial and operational standards, character, business reputation, credit rating, management culture compatibility, and adequate financial resources. If the transfer involves a sale, Carls will assess whether the sales price jeopardizes the transferee's ability to operate the franchise successfully and meet financial obligations. These considerations highlight the importance of selecting a qualified and financially sound transferee to ensure the continued success of the Carls franchise.
If any party with interest in the franchisee receives a legitimate offer from a third party, they must notify CJR in writing of the proposed transfer's terms and provide all reasonably required information and documentation, including a copy of the offer. CJR has 30 days after receiving this notification to elect to purchase the interest on the same financial terms, excluding any finder's or broker's fees. This right of first refusal allows Carls to maintain control over the franchise and potentially acquire the unit itself.