What are the possible lengths of the Renewal Term for a Carls franchise?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
- (1) At the expiration of the Initial Term, Franchisee shall have an option to remain a franchisee at the Franchised Location for a Renewal Term of 10 years or, at Franchisee's option, 5 years.
Franchisee must give CJR written notice of whether or not it intends to exercise its renewal option and the length of the proposed Renewal Term not less than 12 months, nor more than 24 months, before the expiration of the Initial Term.
Notwithstanding the foregoing, if Franchisee subleases the Franchised Location from CJR, Franchisee must give CJR the notice described in the preceding sentence not less than 6 months, nor more than 12 months, before notice of renewal is required to be provided to the landlord under the master lease.
Failure by Franchisee to timely provide CJR the required notice constitutes a waiver by Franchisee of its option to remain a franchisee beyond the expiration of the Initial Term.
- (5) Franchisee shall pay CJR a renewal fee in the amount of $5,000 for a Renewal Term of 5 years or less or $10,000 for a Renewal Term greater than 5 years, but no more than 10 years.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to the 2024 Carls FDD, a franchisee has the option to renew their franchise agreement for either 5 or 10 years. The franchisee must notify CJR in writing of their intent to renew, specifying the desired length of the renewal term, no less than 12 months and no more than 24 months before the initial term expires. However, if the franchisee subleases the location from CJR, the notification period is shortened to between 6 and 12 months before the master lease renewal notice is due to the landlord.
To be eligible for renewal, the Carls franchisee must meet several conditions. They cannot be in default of the franchise agreement or any other agreements with CJR or its affiliates. They also need to ensure compliance with real estate leases, equipment leases, and financing instruments related to the restaurant, as well as maintain good standing with vendors and suppliers. Furthermore, the franchisee must make necessary capital expenditures to renovate and modernize the restaurant to align with the current Carls Jr. image.
Carls will review the franchisee's renewal request and inform them within 4 months whether they are approved for renewal. If approved, Carls will provide a renewal franchise agreement at least 4 months before the initial term expires. This new agreement may differ from the original, particularly in royalty fees and advertising obligations. The franchisee must then pay a renewal fee of $5,000 for a 5-year renewal term or $10,000 for a renewal term longer than 5 years but no more than 10 years. The signed renewal agreement and the renewal fee must be submitted to Carls at least one month before the initial term's expiration.