Under what conditions can Carls approve a supplier or distributor?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
es. Although you are not required to lease a location from us or an affiliate, we must consent to your selection of the site for your Carl's Jr. Restaurant. If you lease the Restaurant premises from a third party landlord, you must sign the Franchise Lease Addendum attached as Appendix G to the Franchise Agreement.
Approval of a supplier or a distributor may be conditioned on requirements relating to the frequency of delivery, reporting capabilities, standards of service, including prompt attention to complaints, sanitation standards, facility standards, insurance and other quality assurance requirements or other criteria, and concentration of purchases, as set forth above, and such approval may be temporary pending a further evaluation of the supplier by us. A fee not to exceed our actual costs of reviewing the supplier or distributor and auditing the facility, if needed, may be charged by us and must be paid by you. We may establish commissaries and distribution facilities owned and operated by us or an affiliate that we will designate as an approved supplier.
One or more of our officers may own nominal interests in certain of our approved suppliers which are publicly traded companies or through investment funds.
We may receive fees, commissions, field-of-use license royalties, or other consideration from approved suppliers based on sales to franchisees, and we may charge non-approved suppliers reasonable testing and/or inspection fees.
If you propose to purchase any goods or materials (that you are not required to purchase from CJR, an affiliate of CJR or a designated supplier) from a supplier that we have not previously approved, you must submit to us a written request for such approval, or you must request that the supplier do so. We have the right to require, as a condition of approval, that our representatives be permitted to inspect the supplier's facilities and that such information, specifications and samples as we reasonably designate be delivered to us and/or to an independent, certified laboratory designated by us for testing prior to granting approval. You must pay a fee not to exceed the reasonable cost of the inspection and the actual cost of the test. In addition to product testing, a facility audit may be required. We will notify you within 60 days as to whether you are authorized to purchase such products from that supplier. In the event we tentatively approve a request for an alternative supplier, you must submit a check for $1,500 to us as a deposit against the cost we incur in inspecting the supplier's facility. You will be responsible for additional costs and expenses associated with the inspection of the facility, which must occur before final approval. Approval of a supplier also may be subject to the frequency of delivery, reporting capabilities, standards of service (including prompt attention to complaints) or other criteria (including the number of suppliers already approved) and may be temporary pending further evaluation of such supplier. We may periodically require that the testing and/or facility audit be performed again at your expense to ensure continued compliance with our specifications and facility standards. We will advise you in writing if we revoke any approvals.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 36–40)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, the approval of a supplier or distributor is subject to certain conditions. These conditions relate to the frequency of delivery, reporting capabilities, standards of service (including prompt attention to complaints), sanitation standards, facility standards, insurance, and other quality assurance requirements. Carls may also consider other criteria and the concentration of purchases when deciding whether to approve a supplier or distributor. The approval may be temporary, pending further evaluation by Carls.
Carls may charge a fee not exceeding the actual costs of reviewing the supplier or distributor and auditing the facility, if needed, and this fee must be paid by the franchisee. If a franchisee proposes to purchase goods or materials from a supplier that Carls has not previously approved, the franchisee must submit a written request for approval, or request that the supplier do so. Carls has the right to require an inspection of the supplier's facilities and the delivery of information, specifications, and samples for testing before granting approval. The franchisee must pay a fee not to exceed the reasonable cost of the inspection and the actual cost of the test.
In the event Carls tentatively approves a request for an alternative supplier, the franchisee must submit a check for $1,500 as a deposit against the cost Carls incurs in inspecting the supplier's facility. The franchisee will be responsible for additional costs and expenses associated with the inspection, which must occur before final approval. Approval of a supplier also may be subject to the frequency of delivery, reporting capabilities, standards of service, or other criteria, including the number of suppliers already approved, and may be temporary pending further evaluation of such supplier. Carls may periodically require that the testing and/or facility audit be performed again at the franchisee's expense to ensure continued compliance with Carls's specifications and facility standards. Carls will advise the franchisee in writing if they revoke any approvals.
Approximately 90% of a franchisee's purchases or leases of fixtures, furnishings, equipment, décor, signs, food items, ingredients, supplies, and other products in connection with the establishment of the Franchised Restaurant must be purchased in accordance with Carls's specifications or from approved suppliers. Carls estimates that these items represent approximately 65% of a franchisee's controllable purchases, excluding labor and general administrative costs in connection with the ongoing operation of the Franchised Restaurant.