Under what conditions will a Carls Franchised Restaurant that has been sold by the Developer continue to count towards the Developer's obligations under the Development Schedule?

According to Carls's 2024 Franchise Disclosure Document, a franchised restaurant sold by the Developer will continue to count towards the Developer's obligations under the Development Schedule if Carls consents to the sale and the restaurant continues to be operated under a franchise agreement with Carls or its affiliates. This provision ensures that developers cannot simply build and flip locations to meet their development quotas without ensuring the continued operation of a Carls restaurant under the Carls system.

This condition is significant for prospective developers as it ties their development obligations to the long-term operation of the restaurants they develop. If a developer sells a restaurant without Carls's consent or if the restaurant ceases to operate under a Carls franchise agreement after the sale, that restaurant may no longer count towards fulfilling the developer's required development schedule. This could lead to a breach of the development agreement if the developer fails to meet the required number of operating restaurants.

This requirement protects Carls's interests by ensuring that restaurants developed under a development agreement continue to operate as Carls franchises, maintaining brand consistency and revenue streams. For the developer, it means that selling a restaurant does not automatically relieve them of their development obligations unless specific conditions are met, adding a layer of responsibility and potentially affecting their exit strategy for individual units. The initial franchise fee for each franchised restaurant required to be developed under the agreement is $25,000.