What is the transfer fee that the transferor must pay to CJR for Carls' review of the transfer application?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
C. If CJR consents to a proposed Transfer, prior to the Transfer becoming effective:
(1) The transferor shall pay CJR a nonrefundable Transfer fee under this Agreement of $2,500 in connection with CJR's review of the Transfer application.
D. If Developer is an individual or a partnership and desires to Transfer this Agreement to a corporation (or limited liability company) formed for the convenience of ownership, the requirements of Section 10.B. shall apply to such a Transfer, however, Developer will not be required to pay a Transfer fee.
Source: Item 23 — RECEIPTS (FDD pages 80–480)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, a transferor is required to pay a nonrefundable fee of $2,500 to CJR (Carls Restaurant Inc.) for the review of their transfer application. This fee must be paid before the transfer becomes effective, assuming CJR consents to the proposed transfer.
This fee covers the costs associated with Carls's evaluation of the proposed transfer, including assessing the transferee's qualifications and ensuring they meet the brand's standards. It is important to note that this fee is nonrefundable, regardless of whether the transfer is ultimately approved or denied. This means that the transferor will not receive the $2,500 back even if the transfer does not proceed.
However, the FDD states that if the developer is an individual or partnership transferring the agreement to a corporation or LLC for ownership convenience, the transfer fee will be waived. This exception could provide significant savings for franchisees structuring their business in this way. Franchisees should carefully consider these transfer requirements and associated costs as part of their long-term business planning.
Transfer fees are a common practice in franchising, intended to cover the franchisor's administrative and legal expenses in reviewing and approving a transfer. The fee amount can vary significantly across different franchise systems. Franchisees should be aware of all conditions and requirements for transferring their franchise, as outlined in the franchise agreement and FDD.