Who is required to execute a general release and covenant not to sue when transferring a Carls franchise?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
- (6) Franchisee, all individuals who executed this Agreement and all guarantors of Franchisee's obligations must execute a general release and a covenant not to sue, in a form satisfactory to CJR, of any and all claims against CJR and its affiliates and their respective past and present officers, directors, managers, shareholders, members, agents and employees, in their corporate and individual capacities, including, without limitation, claims arising under federal, state and local laws, rules and ordinances, and claims arising out of, or relating to, this Agreement, any other agreements between Franchisee and CJR or its affiliates and Franchisee's operation of the Franchised Restaurant and all other restaurants operated by Franchisee that are franchised by CJR or its affiliates.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to the 2024 Carls FDD, when transferring a franchise, the following parties must execute a general release and a covenant not to sue: the franchisee, all individuals who originally executed the franchise agreement, and all guarantors of the franchisee's obligations. This release and covenant must be in a form that is satisfactory to Carls.
The release covers any and all claims against Carls, its affiliates, and their respective officers, directors, managers, shareholders, members, agents, and employees, both past and present, in their corporate and individual capacities. This includes, but is not limited to, claims arising under federal, state, and local laws, rules, and ordinances. It also encompasses claims arising out of or relating to the franchise agreement, any other agreements between the franchisee and Carls or its affiliates, and the franchisee's operation of the franchised restaurant, as well as all other restaurants operated by the franchisee that are franchised by Carls or its affiliates.
This requirement ensures that Carls is protected from potential legal claims related to the franchise agreement and the operation of the restaurant both before and after the transfer. It is a standard practice in franchising to include such releases to mitigate future legal risks and ensure a clean break between the franchisor and the outgoing franchisee. Prospective franchisees should carefully review this requirement with legal counsel to understand its implications fully.