Under what condition will the Carls development incentive program terminate following written notice to the franchisee?

According to the 2024 Carls FDD, the development incentive program can be terminated if the franchisee, development principal, any member of the continuity group, any 10% owner, or any affiliated entity remains in default beyond the applicable cure period under several conditions. These conditions include being in default under any other agreement with Carls or its affiliates, under any real estate lease, equipment lease, or financing instrument relating to a franchised restaurant, or with any vendor or supplier to a franchised restaurant. However, if the default is not by the developer, the developer must be given written notice of the default and 30 days to cure it.

Additionally, Carls can terminate the development incentive program if the franchisee fails or refuses to comply with any other provision of the agreement or any requirement of the Carls Jr. system and does not correct the failure or refusal within 30 days after receiving written notice of default (10 days for monetary defaults). If the default cannot be corrected within 30 days (excluding monetary defaults), the franchisee has additional time, not exceeding 90 days, to correct the default, provided they begin taking corrective actions during the initial 30-day cure period and diligently pursue those actions to completion. A failure to materially comply with any requirements imposed by the agreement or the development guide, or to carry out the terms of the agreement in good faith, will also constitute a default.

Furthermore, if the franchisee has received two or more notices of default within the previous 12 months, Carls is entitled to send a notice of termination upon the franchisee's next default within that 12-month period without providing an opportunity to remedy that default. However, if any valid law requires a longer notice or cure period prior to termination, the agreement will be amended to conform to the minimum notice or cure period required by the applicable law.

These stipulations are important for prospective Carls franchisees to understand, as they outline the specific circumstances under which the development incentive program can be terminated. Failure to adhere to the terms and conditions of the agreements, including timely corrections of defaults, can result in the loss of the program incentives. Franchisees should be aware of these requirements and ensure they maintain compliance to avoid potential termination of the incentive program.