Does Carls have the right to change materials?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
of the Carl's Jr. Restaurant and must maintain sufficient inventories, adequately staff each shift with qualified employees and continuously operate the Franchised Restaurant as we specify in the OPM or otherwise in writing.
You must meet and maintain the highest applicable health standard and rating. You must operate the Franchised Restaurant in strict conformity with the methods, standards and specifications that we prescribe in the OPM or otherwise in writing.
You must offer for sale and sell at the Franchised Restaurant all and only those products and services as are expressly authorized by us in the OPM or otherwise in writing. We may restrict sales of menu items to certain time periods during the day. We have the right to change the menu items, ingredients, products, materials, supplies and paper goods or the standards and specifications of each, and there are no limits on our ability to do so. You must promptly comply with the new requirements. We do not limit the customers to whom you may sell goods or services. You must offer to customers online ordering and delivery services pursuant to online ordering/delivery programs that we may from time to time establish with approved vendors and comply with our specifications regarding same.
ITEM 17 RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION
THE FRANCHISE RELATIONSHIP
The following tables list certain important provisions of the Development and Franchise Agreements. You should read these provisions in the agreements attached to this disclosure document.
DEVELOPMENT AGREEMENT
| Provision | Section In Development Agreement | Summary |
|---|---|---|
| a. Length of the franchise term | Section 1.A. |
Source: Item 16 — RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL (FDD page 61)
What This Means (2024 FDD)
According to the 2024 FDD, Carls has extensive rights to modify various aspects of the franchise system, including the materials franchisees are required to use. Carls maintains the authority to change menu items, ingredients, products, materials, supplies, and paper goods, as well as the standards and specifications for each of these items. Franchisees are obligated to promptly comply with these new requirements. This broad authority allows Carls to adapt to market changes, maintain quality control, and ensure brand consistency across all franchise locations.
Carls also has the right to modify the list of approved brands and suppliers. Franchisees must not reorder any brand from a supplier that is no longer approved after receiving written notification of the change. This ensures that franchisees adhere to Carls's approved sourcing, maintaining standards and potentially leveraging negotiated pricing or advertising support that Carls secures with specific suppliers. Approximately 90% of a franchisee's purchases related to fixtures, furnishings, equipment, décor, signs, food items, ingredients, supplies, and other products must comply with Carls's specifications or be purchased from approved suppliers. These items are estimated to represent about 65% of a franchisee's controllable purchases, excluding labor and administrative costs.
Carls may also modify the Carl's Jr. System, including changes to the Operations Procedures Manual (OPM), menu formats, required equipment, signage, building and premises design, presentation of proprietary marks, administrative forms, and payment methods. These modifications can also include adopting new or modified proprietary marks or copyrighted materials. This allows Carls to evolve the brand and operational standards, ensuring that all franchise locations reflect the current brand image and operational practices.
For a prospective franchisee, these stipulations mean that they must be prepared to adapt to changes implemented by Carls, which may include changes in suppliers, products, and operational procedures. While these changes are intended to benefit the system as a whole, they may also require franchisees to make additional investments or adjustments to their business practices. Franchisees should stay informed of any modifications and maintain open communication with Carls to ensure compliance and minimize potential disruptions.