What minimum equity ownership interest must the Development Principal have in the franchisee entity for a Carls franchise, unless modified by Carls?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
The Development 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. (This requirement does not apply if you were a publicly-held entity or a wholly-owned subsidiary of a publiclyheld entity as of the date of the first franchise-related agreement between you and us.) 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 we have approved, a Multi-Unit Development Manager (discussed below), the Development Principal must: (1) devote full time and best efforts to supervising the development of the Franchised Restaurants; and (2) maintain his/her primary residence within a reasonable driving distance of the Development Territory, unless waived in writing by us. The Development Principal will be required to successfully complete our development training and any additional training required by us. If you are developing restaurants in multiple markets that are franchised by us or our affiliates, an individual meeting the above qualifications will serve as the Development Principal in at least one market.
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, the Development Principal must maintain a minimum equity ownership interest of 10% in the franchisee entity, or in the general partner if the franchisee is a limited partnership. This requirement can be modified at Carls's sole discretion. However, this equity ownership requirement does not apply if the franchisee was a publicly-held entity or a wholly-owned subsidiary of a publicly-held entity when the initial franchise agreement was established.
The Development Principal is also required to be a member of the Continuity Group and must have full control over the daily development of the franchised restaurants. Unless a Multi-Unit Development Manager has been named and approved by Carls, the Development Principal must devote their full time and best efforts to supervising the development of the franchised restaurants and maintain their primary residence within a reasonable driving distance of the Development Territory, unless Carls waives this requirement in writing.
Furthermore, the Development Principal is required to successfully complete Carls's development training and any additional training that Carls requires. If the franchisee is developing restaurants in multiple markets franchised by Carls or its affiliates, an individual meeting the qualifications of a Development Principal must serve in at least one market. These stipulations ensure that the Development Principal is actively involved and invested in the success of the Carls franchise.