Under what conditions does Carls require prior written consent for a transfer of the franchise?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
e are no restrictions on our right to assign. | | | k. "Transfer" by you defined | Section 18.A. | Includes sale, assignment, transfer, conveyance, gift, pledge, mortgage or other encumbrance of any direct or indirect interest in you, the Franchise Agreement, the Franchise, the Franchised Restaurant, the assets of the Franchised Restaurant, the Franchised Location or any other assets pertaining to your operations under the Franchise Agreement. |
| Provision | Section In Franchise Agreement | Summary | |
|---|---|---|---|
| l. | Our approval of transfer by you | Sections 18.B & 8.G. | Unless otherwise expressly permitted, you must obtain our prior written consent for any Transfer (as defined in the Franchise Agreement). |
| m. Conditions for our approval of transfer | Sections 18.BC. | Conditions include: transferee qualified; reasonable sales price; payment of amounts due; no default under any agreement with CJR or its affiliates; no default beyond the applicable cure period under any real estate or equipment lease or financing instrument relating to the Franchised Restaurant or agreement with any vendor or supplier to the Franchised Restaurant; signed release; transferee must complete training; compliance with all obligations to us or our affiliates under transferee's and each of transferee's affiliates development and franchise agreements with us or our affiliates; remodeling, maintenance and facility upgrades to modernize Franchised Restaurant to current image; transfer fee paid; and agreements signed. | |
| n. Our right of first refusal to acquire your business | Section 18.J. | We or our designee can match any offer for your business. | |
| o. Our option to purchase your business | Section 23 | We can purchase some or all of your assets upon expiration or earlier termination of the Franchise Agreement at a price agreed upon or set by appraisers. | |
| p. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 61–66)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, prior written consent from Carls is generally required for any transfer of the franchise. The FDD specifies that 'transfer' includes a sale, assignment, transfer, conveyance, gift, pledge, mortgage, or other encumbrance of any direct or indirect interest in the franchisee, the Franchise Agreement, the franchise itself, the Franchised Restaurant, the assets of the Franchised Restaurant, the Franchised Location, or any other assets pertaining to the franchisee's operations under the Franchise Agreement.
Carls outlines specific conditions that must be met to obtain approval for a transfer. These conditions include ensuring the transferee is qualified, the sales price is reasonable, all amounts due to Carls are paid, and there are no defaults under any agreement with Carls or its affiliates. Additionally, there must be no defaults beyond the applicable cure period under any real estate or equipment lease or financing instrument related to the Franchised Restaurant, or any agreement with a vendor or supplier. A signed release is required, and the transferee must complete training.
Further conditions for transfer approval involve compliance with all obligations to Carls or its affiliates under the transferee's and each of the transferee's affiliates development and franchise agreements. The Franchised Restaurant must undergo remodeling, maintenance, and facility upgrades to modernize it to the current image. Finally, the transfer fee must be paid, and all required agreements must be signed.
There is an exception to the transfer rules. Transfer to your spouse, children, parent, sibling or member of your Continuity Group is allowed.