What releases must a Carls developer and related parties execute as a condition of transfer approval?

According to Carls's 2024 Franchise Disclosure Document, as a condition of transfer approval, the developer, all individuals who executed the Development Agreement, and all guarantors of the developer's obligations must execute a general release and a covenant not to sue. These documents must be in a form satisfactory to Carls.

The general release and covenant not to sue must cover any and all claims against Carls and its affiliates, as well as their respective past and present officers, directors, managers, shareholders, members, agents, and employees, both in their corporate and individual capacities. This includes, without limitation, claims arising under federal, state, and local laws, rules, and ordinances. It also encompasses claims arising out of, or relating to, the Development Agreement and any other agreements between the developer and Carls or its affiliates.

This requirement ensures that Carls is protected from potential legal action by the transferring developer and related parties regarding any aspect of their relationship prior to the transfer. It is a standard practice in franchising to mitigate future legal risks when a franchise changes hands. The prospective franchisee should carefully review the specific terms of the release and covenant not to sue to understand the full scope of claims being waived.