Under what conditions will the Carls reduced royalty and APO program incentives be terminated following written notice to the franchisee?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
- 3. Termination of Program Incentives. This Addendum and the Program will terminate following written notice to Franchisee if:
New Restaurant DIP Addendum 05/24
- A. Franchisee fails to open the Franchised Restaurant on or before 120 days after the contractual opening date pursuant to the terms of the Franchisee's Development Agreement or the Franchise Agreement; or
- B. Franchisee or any affiliate of Franchisee receives, during the first two years of operation of the Franchised Restaurant under the Franchise Agreement, a written notice of default under any agreement between Franchisee or any affiliate of Franchisee and CJR or any affiliate of CJR and fails to cure the default within the applicable cure period, if any.
Source: Item 23 — RECEIPTS (FDD pages 80–480)
What This Means (2024 FDD)
According to the 2024 Carls FDD, the reduced royalty and APO (Advertising Production Obligation) program incentives will be terminated following written notice to the franchisee under specific conditions. These conditions relate to the franchisee's adherence to the development timeline and their compliance with agreements with Carls.
Specifically, the program incentives will be terminated if the franchisee fails to open the franchised restaurant within 120 days after the contractual opening date, as defined in the Development Agreement or Franchise Agreement. Additionally, the incentives will be terminated if the franchisee or any of their affiliates receive a written notice of default under any agreement with Carls or its affiliates during the first two years of the restaurant's operation and fail to cure the default within the applicable cure period.
If the addendum providing these incentives is terminated during the first three years of the franchised restaurant's operation, the royalty fee and APO will immediately revert to the amounts specified in the Franchise Agreement. This means the franchisee will lose the benefit of the reduced fees and obligations and will be required to pay the standard rates. Prospective franchisees should be aware of these conditions and ensure they can meet the opening timeline and maintain compliance with all agreements to avoid losing the reduced royalty and APO incentives.