Does Carls have any restrictions on assigning its franchise agreement?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
e are no restrictions on our right to assign. | | | k. "Transfer" by you defined | Section 18.A. | Includes sale, assignment, transfer, conveyance, gift, pledge, mortgage or other encumbrance of any direct or indirect interest in you, the Franchise Agreement, the Franchise, the Franchised Restaurant, the assets of the Franchised Restaurant, the Franchised Location or any other assets pertaining to your operations under the Franchise Agreement. |
| Provision | Section In Franchise Agreement | Summary | |
|---|---|---|---|
| l. | Our approval of transfer by you | Sections 18.B & 8.G. | Unless otherwise expressly permitted, you must obtain our prior written consent for any Transfer (as defined in the Franchise Agreement). |
| m. Conditions for our approval of transfer | Sections 18.BC. | Conditions include: transferee qualified; reasonable sales price; payment of amounts due; no default under any agreement with CJR or its affiliates; no default beyond the applicable cure period under any real estate or equipment lease or financing instrument relating to the Franchised Restaurant or agreement with any vendor or supplier to the Franchised Restaurant; signed release; transferee must complete training; compliance with all obligations to us or our affiliates under transferee's and each of transferee's affiliates development and franchise agreements with us or our affiliates; remodeling, maintenance and facility upgrades to modernize Franchised Restaurant to current image; transfer fee paid; and agreements signed. | |
| n. Our right of first refusal to acquire your business | Section 18.J. | We or our designee can match any offer for your business. | |
| o. Our option to purchase your business | Section 23 | We can purchase some or all of your assets upon expiration or earlier termination of the Franchise Agreement at a price agreed upon or set by appraisers. | |
| p. Your death or disability | Section 18.G.(1)(b) | Transfer to your spouse, children, parent, sibling or member of your Continuity Group is allowed. | |
| q. Non-competition covenants during the term of the franchise | Section 20.C. | Except with our consent - no diversion of any business or customer to any competitor; |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 61–66)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, a franchisee faces restrictions when transferring their franchise agreement. Carls requires the franchisee to obtain prior written consent for any transfer unless expressly permitted otherwise. The definition of "transfer" is broad, encompassing sale, assignment, transfer, conveyance, gift, pledge, mortgage, or other encumbrance of any direct or indirect interest in the franchisee, the Franchise Agreement, the Franchise, the Franchised Restaurant, its assets, the Franchised Location, or any other assets pertaining to operations under the Franchise Agreement.
Carls outlines specific conditions that must be met to gain approval for a transfer. These conditions include ensuring the transferee is qualified, the sales price is reasonable, all due amounts are paid, and there are no defaults under any agreement with CJR or its affiliates. The franchisee must also ensure there are no defaults beyond any applicable cure period under any real estate or equipment lease or financing instrument related to the Franchised Restaurant, or any agreement with a vendor or supplier. A signed release is required, and the transferee must complete training. The transferee must also comply with all obligations to Carls or its affiliates under the transferee's and each of the transferee's affiliates development and franchise agreements with Carls or its affiliates, remodel, maintain and upgrade the facility to modernize the Franchised Restaurant to the current image, pay a transfer fee, and sign required agreements.
Carls also retains certain rights regarding the transfer of a franchise. Carls or its designee has the right of first refusal to match any offer for the franchisee's business. Additionally, Carls has the option to purchase some or all of the franchisee's assets upon the expiration or earlier termination of the Franchise Agreement at a price agreed upon or set by appraisers.
There is an exception to the transfer restrictions in the event of death or disability of the franchisee. In such cases, the franchise can be transferred to the franchisee's spouse, children, parent, sibling, or a member of their Continuity Group.