Under what conditions is the Carls Development Fee considered fully earned and non-refundable by CJR?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
timely comply with the development plan or any material aspect of the development plan shall constitute a material, non-curable breach of this Agreement, permitting CJR to terminate this Agreement immediately by giving written notice of termination to Developer.
- C. The Initial Franchise Fee for each Franchised Restaurant required to be developed under this Agreement is $25,000.
- D. If, during the Development Term, Developer sells a Franchised Restaurant that was developed pursuant to this Agreement, that Franchised Restaurant will continue to be counted as a Franchised Restaurant for the purpose of meeting Developer's obligations under the Development Schedule, provided that the sale has been consented to by CJR and o
Source: Item 23 — RECEIPTS (FDD pages 80–480)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, the development fee is considered fully earned and non-refundable once paid to CJR. The development fee is $10,000 for each franchised restaurant the developer agrees to develop in the development territory during the development term.
The document specifies that upon the execution of each franchise agreement for each franchised restaurant the developer has agreed to develop, the applicable development fee of $10,000 will be credited against the full initial franchise fee due to CJR. This means that while the development fee is non-refundable, it essentially acts as a deposit towards the initial franchise fee for each location.
This arrangement is fairly common in multi-unit development franchise agreements. It incentivizes the developer to proceed with opening the agreed-upon number of locations, as they risk losing the development fee if they fail to do so. However, it also benefits the franchisee by applying the fee towards the initial franchise fee, reducing the overall upfront investment required for each restaurant.