Under what condition is a Carls Developer required to update Appendix C only with respect to changes in ownership interests of members of the Continuity Group?

According to Carls's 2024 Franchise Disclosure Document, a Developer is required to update Appendix C only with respect to changes in ownership interests of members of the Continuity Group if the Developer becomes a publicly-held entity after the date of the first franchise-related agreement between the Developer and CJR or one of its affiliates. This contrasts with the requirement for all Developers to furnish CJR with a list of all holders of direct or indirect ownership interest in the Developer and their respective percentage interests as of the date of the agreement, as detailed in Appendix C.

This provision applies specifically to Developers that transition to being publicly-held entities after their initial agreement with Carls. The requirement to update Appendix C focuses solely on changes within the Continuity Group, which includes the Development Principal and those holding 10% or more ownership interest in the Developer. This ensures that Carls maintains an accurate record of the key individuals and entities controlling the Developer, especially after the ownership structure becomes more complex due to the public offering.

For a prospective Carls franchisee, this means that if your entity goes public after signing the franchise agreement, you will only need to update Carls regarding changes in the ownership of those individuals and entities that comprise the Continuity Group. This likely simplifies the reporting requirements compared to providing updates on all shareholders. However, it is crucial to understand who constitutes the Continuity Group and what percentage of ownership they must maintain (at least 51%) to remain in compliance with the agreement.