Under what circumstances can CJR terminate the Carls franchise agreement without providing an opportunity to cure?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
In addition to the grounds for termination that may be stated elsewhere in this Agreement, CJR may terminate this Agreement, and the rights granted by this Agreement, upon written notice to Franchisee without an opportunity to cure upon the occurrence of any of the following events:
- (1) Franchisee ceases to continuously operate the Franchised Restaurant for a period in excess of 5 consecutive days, unless the closing is due to a Force Majeure or is approved in writing in advance by CJR.
If the closing is due to fire or other natural disaster, Franchisee must rebuild and reopen the Franchised Restaurant within six months following the fire or other natural disaster event or such longer period of time as agreed to with CJR.
(2) Franchisee is insolvent or is unable to pay its creditors (including CJR); files a petition in bankruptcy, an arrangement for the benefit of creditors or a petition for reorganization; there is filed against Franchisee a petition in bankruptcy, an arrangement for the benefit of creditors or petition for reorganization, which is not dismissed within 60 days of the filing; Franchisee makes an assignment for the benefit of creditors; or a receiver or trustee is appointed for Franchisee and not dismissed within 60 days of the appointment.
(3) Execution is levied against Franchisee's business or property; suit to foreclose any lien or mortgage against the premises or equipment of the Franchised Restaurant is instituted against Franchisee and is not dismissed within 60 days; or the real or personal property of the Franchised Restaurant shall be sold after levy thereupon by any sheriff, marshal or constable.
(4) There is a material breach by Franchisee of any obligation under Section 20.
(5) Any Transfer that requires CJR's prior written consent occurs without Franchisee having obtained that prior written consent.
(6) CJR discovers that Franchisee made a material misrepresentation or omitted a material fact in the information that was furnished to CJR in connection with its decision to enter into this Agreement.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to the 2024 Carls Franchise Disclosure Document, CJR (Carls Jr. Restaurants LLC) can terminate the franchise agreement without allowing the franchisee an opportunity to cure under several specific circumstances. These include ceasing continuous operation of the franchised restaurant for more than five consecutive days (unless due to a Force Majeure or approved in writing by CJR), becoming insolvent or unable to pay creditors, filing for bankruptcy, or having a bankruptcy petition filed against the franchisee that is not dismissed within 60 days.
Additionally, Carls can terminate the agreement without a cure period if there is a levy against the franchisee's business or property, a foreclosure suit against the restaurant's premises or equipment that is not dismissed within 60 days, or the restaurant's property is sold after a levy. A material breach of obligations under Section 20 of the agreement, any transfer requiring CJR's consent that occurs without obtaining that consent, or discovering that the franchisee made a material misrepresentation or omitted a material fact when providing information to CJR are also grounds for termination without a cure period.
Furthermore, if a franchisee fails to achieve a passing score on a follow-up inspection conducted at least 30 days after receiving the initial inspection report, Carls may terminate the agreement without an opportunity to cure. These stipulations highlight the importance of maintaining continuous operation, financial stability, and adherence to the franchise agreement's terms to avoid immediate termination of the Carls franchise agreement.