Under what circumstances related to continuous operation of the Franchised Restaurant can a Carls franchisee close for more than 5 consecutive days without being in breach of contract?
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.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to the 2024 Carls Franchise Disclosure Document, a franchisee can cease continuous operation of their franchised restaurant for more than five consecutive days without breaching the agreement under two specific conditions. First, if the closing is due to a Force Majeure, which generally refers to unforeseeable circumstances that prevent someone from fulfilling a contract. Second, if Carls approves the closing in writing in advance.
If the closing is due to fire or other natural disaster, the franchisee must rebuild and reopen the restaurant within six months following the event, unless Carls agrees to a longer period. Failure to meet these conditions can result in Carls terminating the franchise agreement without an opportunity for the franchisee to remedy the situation.
This clause is significant for prospective franchisees as it highlights the importance of maintaining continuous operation to avoid potential breach of contract and termination. Franchisees need to be aware of what constitutes a Force Majeure event and the process for obtaining written approval from Carls for any planned closures exceeding five days. The six-month rebuilding requirement after a fire or natural disaster also underscores the need for adequate insurance coverage and disaster recovery planning.