What standards must a proposed transferee meet to be approved by Carls?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
ght, exercisable at any time, to transfer and assign all or any part of its rights and obligations under this Agreement to any person or legal entity without the consent of Developer. Developer agrees that CJR will have no liability after the effective date of transfer or assignment for the performance of, or any failure to perform, any obligations transferred.
10. TRANSFERS BY DEVELOPER
A. Developer understands and acknowledges that the rights and duties set forth in this Agreement are personal to Developer, that CJR has entered into this Agreement in reliance on Developer's (and Developer's direct and indirect owners') business skill, financial capacity, personal character, experience and demonstrated or purported ability in developing and operating high quality foodservice operations and that CJR has entered into this Agreement with the understanding that, except as otherwise reserved by CJR in Section 2, Developer will be the only franchisee of CJR in the Development Territory during the Development Term. Accordingly, neither Developer nor any immediate or remote successor to any part of Developer's interest in this Agreement, nor any individual, partnership, corporation or other legal entity which directly or indirectly has an interest in Developer shall sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any direct or indirect interest in Developer, this Agreement or any other assets pertaining to Developer's operations under this Agreement (collectively "Transfer") without the prior written consent of CJR. CJR shall be free to withhold consent to any Transfer, without consideration of the factors listed in Section 10.B., if Developer does not propose to Transfer the same interest with respect to all agreements with CJR in the Development Territory.
Except as otherwise provided in this Agreement, any purported Transfer, by operation of law or otherwise, not having the prior written consent of CJR shall be null and void and shall constitute a material
CJR TR Development Agreement – 5/24 Franchisee (Alpha Code) DMA/Area of Development – Number of Restaurants
breach of this Agreement, for which CJR may terminate this Agreement without providing Developer an opportunity to cure the breach.
- B. Developer shall advise CJR in writing of any proposed Transfer, submit (or cause the proposed transferee to submit) a franchise application for the proposed transferee, submit a copy of all contracts and all other agreements or proposals and submit all other information requested by CJR relating to the proposed Transfer. If CJR does not exercise its right of first refusal pursuant to Section 10.J., the decision as to whether or not to consent to a proposed Transfer shall be made by CJR in its sole discretion and shall include numerous factors deemed relevant by CJR. These factors may include, but will not be limited to, the following:
- (1) The proposed transferee (and if the proposed transferee is not a natural person, all persons that have any direct or indirect interest in the transferee as CJR may require) must demonstrate to CJR's satisfaction that it has extensive experience in high quality restaurant operations of a character and complexity similar to the restaurants franchised by CJR or its affiliates; must meet the managerial, operational, experience, quality, character and business standards for a developer promulgated by CJR from time to time; must possess a good character, business reputation and credit rating; must have an organization whose management culture is compatible with CJR's management culture;
Source: Item 23 — RECEIPTS (FDD pages 80–480)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, if a developer seeks to transfer their franchise agreement, the proposed transferee must meet several standards for Carls to approve the transfer. Carls has sole discretion over the decision to consent to a proposed transfer, and will consider numerous factors.
The proposed transferee must demonstrate extensive experience in high-quality restaurant operations similar to those franchised by Carls or its affiliates. They must also meet Carls's managerial, operational, experience, quality, character, and business standards for a developer, possess a good character, business reputation, and credit rating, and have a management culture compatible with Carls's. Additionally, the transferee must have adequate financial resources and working capital to meet the developer's obligations under the agreement, as determined by Carls.
Carls will also consider whether the sales price is reasonable, ensuring it does not jeopardize the transferee's ability to develop, maintain, operate, and promote the franchised restaurants or meet financial obligations to Carls, third-party suppliers, and creditors. Unless waived by Carls, the transferee and certain designated employees must complete the development training programs. The transferee and its affiliates must also be in compliance with all obligations to Carls or its affiliates under any existing development or franchise agreements.
Prior to the transfer becoming effective, the transferor must pay Carls a nonrefundable transfer fee of $2,500. Both the developer and the proposed transferee must execute an assignment agreement and any necessary amendments to reflect the transfer. The transferor remains liable for all obligations to Carls incurred before the transfer date and must execute any instruments requested by Carls to evidence this liability. Carls's consent may be conditioned on the transferee agreeing that their obligations to pay all amounts due to Carls and comply with the agreement will take precedence over any financing arrangements related to the transfer.