Under what circumstances might CJR offer incentives to a Carls franchisee, such as waiving initial fees or decreasing royalty fees?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
Development Incentive Program. Franchisees who sign a Development Agreement or a Franchise Agreement for a new-construction Carl's Jr. Restaurant by no later than May 24, 2025, may qualify for our Carl's Jr. Restaurant 2024 Development Incentive Program (the "CJR 2024 Development Incentive Program"). Under the CJR 2024 Development Incentive Program, we will reduce the royalty fee and APO fee as set forth in Item 6 for the first three years of the franchise term. The CJR 2024 Development Incentive applies to the development of new Carl's Jr. Restaurants only. The CJR 2024 Development Incentive does not apply to: (i) relocated, remodeled, reimaged, or scrape and rebuild Carl's Jr. Restaurants, (ii) Carl's Jr. Restaurants opened and operated from non-traditional locations, and (iii) Carl's Jr. Restaurants developed in high population density areas.
To be eligible for the CJR 2024 Development Incentive Program, an existing franchise must meet the following requirements: (i) sign a Development Agreement or Franchise Agreement for the development of one or more newly-constructed Carl's Jr. Restaurant(s) by no later than May 24, 2025, (ii) franchisee must open the newly-constructed Carl's Jr. Restaurant(s) by the date(s) outlined in the corresponding Development Agreement or Franchise Agreement, (iii) franchisee may not be in default of its obligations under its existing franchise agreements or related agreements with CJR or its affiliates, (iv) franchisee must be approved for growth by CJR and its affiliates, (v) franchisee must satisfy CJR's thencurrent financial and operational requirements for new restaurant development, and (vi) franchisee and the Carl's Jr. Restaurant(s) otherwise meet the requirements of the CJR 2024 Development Incentive Program. New franchisees are also eligible to participate in the CJR Development Incentive Program provided they: (i) sign a Development Agreement or Franchise Agreement for the development of one or more newlyconstructed Carl's Jr. Restaurant(s) by no later than May 24, 2025, (ii) open the newly-constructed Carl's Jr. Restaurant(s) by the date(s) outlined in the corresponding Development Agreement or Franchise Agreement, and (iii) meet the requirements of the CJR 2024 Development Incentive Program.
If you qualify for the CJR 2024 Development Incentive Program, simultaneously with your execution of the qualifying Franchise Agreement, you will sign a CJR 2024 Development Incentive Program Addendum to the Franchise Agreement (Exhibit L), which memorializes your right to receive the development incentives described above for the applicable Franchised Restaurant.
If you sign the CJR 2024 Development Incentive Program Addendum to Franchise Agreement, you will not be entitled, with respect to the applicable Franchised Restaurant covered by the CJR 2024 Development Incentive Program, to any other incentives that have been or may be offered by us.
Source: Item 5 — INITIAL FEES (FDD pages 24–26)
What This Means (2024 FDD)
According to the 2024 FDD, Carls offers a Development Incentive Program to stimulate the development of new franchised restaurants. Franchisees who sign a Development Agreement or a Franchise Agreement for a new-construction Carls Jr. Restaurant by May 24, 2025, may qualify for the Carl's Jr. Restaurant 2024 Development Incentive Program. This program reduces the royalty fee and APO (Advertising and Promotion Obligation) fee for the first three years of the franchise term.
To be eligible for the CJR 2024 Development Incentive Program, existing and new franchisees must sign a Development Agreement or Franchise Agreement for the development of one or more newly-constructed Carl's Jr. Restaurants by no later than May 24, 2025, and open the newly-constructed Carl's Jr. Restaurants by the dates outlined in the corresponding agreements. Existing franchisees must not be in default of their obligations, must be approved for growth by CJR and its affiliates, and must satisfy CJR's current financial and operational requirements for new restaurant development. The restaurant must also meet the requirements of the CJR 2024 Development Incentive Program.
The CJR 2024 Development Incentive does not apply to relocated, remodeled, reimaged, or scrape and rebuild Carl's Jr. Restaurants. It also does not apply to Carl's Jr. Restaurants opened and operated from non-traditional locations or those developed in high population density areas. If a franchisee qualifies for the CJR 2024 Development Incentive Program, they will sign a CJR 2024 Development Incentive Program Addendum to the Franchise Agreement, which confirms their right to receive the development incentives. Franchisees who sign the addendum will not be entitled to any other incentives offered by Carls.