Can Carls require franchisees to provide profit and loss statements and balance sheets at times other than the standard monthly and quarterly submissions?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee shall, at Franchisee's expense, submit to CJR, in the form and manner (which may be through an online portal or website) prescribed by CJR: (i) a monthly profit and loss statement and balance sheet for the Franchised Business (both of which may be unaudited) within 30 days after the end of each month, and (ii) a quarterly profit and loss statement and balance sheet for Franchisee (both of which may be unaudited) within 30 days after the end of each fiscal quarter (as defined by CJR from time to time) during each fiscal year (as defined by CJR from time to time). CJR shall have the right, to be exercised in its sole discretion, to require that Franchisee provide CJR profit and loss statements and balance sheets at other times as requested by CJR. Each statement and balance sheet shall be signed by Franchisee or by Franchisee's treasurer or chief financial officer attesting that it is true, correct and complete and uses accounting principles applied on a consistent basis which accurately and completely reflect the financial condition of Franchisee.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, franchisees are required to submit monthly and quarterly profit and loss statements and balance sheets to CJR (Carls Jr. Restaurants) within 30 days after the end of each month or fiscal quarter. These financial statements do not need to be audited.
CJR has the right to request these financial documents at other times as well, with the timing of these requests being at CJR's sole discretion. These statements and balance sheets must be signed by the franchisee, treasurer, or chief financial officer, attesting to their accuracy, completeness, and adherence to consistent accounting principles.
This means that a Carls franchisee must be prepared to provide financial reports more frequently than the standard monthly and quarterly submissions if Carls deems it necessary. This could place an additional administrative burden on the franchisee, requiring them to maintain up-to-date financial records and be ready to produce them on short notice. It is important for prospective franchisees to understand this potential obligation and factor it into their business planning and resource allocation.