What is the required action for a Carls franchisee upon receiving written notice of a modification to a covenant in Section 12?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
CJR shall have the right, in its sole discretion, to reduce the scope of any covenant in this Section 12 effective immediately upon Developer's receipt of written notice, and Developer agrees that it shall comply forthwith with any covenant as so modified, which shall be fully enforceable notwithstanding the provisions of Section 20.
Source: Item 23 — RECEIPTS (FDD pages 80–480)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, Carls has the right to modify covenants within Section 12 of the development agreement. Upon receiving written notice of such a modification from Carls, a franchisee must comply with the modified covenant immediately.
This means that Carls can unilaterally change the scope of these covenants, and the franchisee is obligated to adhere to the changes as soon as they receive notice. The franchisee's agreement to comply with these modifications is fully enforceable, regardless of Section 20 of the agreement, which might typically address amendments or modifications.
Section 12 likely contains covenants related to competitive activities and restrictions on the franchisee's involvement with other businesses, as indicated in other sections. The ability for Carls to modify these covenants provides them with significant flexibility to adapt to changing market conditions or competitive threats, but it also introduces uncertainty for the franchisee, who must be prepared to adjust their business practices accordingly.