Under what conditions can Carls terminate a franchise agreement with cause?

According to Carls's 2024 Franchise Disclosure Document, Carls can terminate a franchise agreement with cause under several conditions, as detailed in Section 21 of the Franchise Agreement. These conditions include defaults that can be cured and those that cannot. For curable defaults, Carls will provide an opportunity to correct the issue. Specifically, franchisees have 10 days to cure monetary defaults and 30 days to cure other defaults, except those listed as non-curable.

Non-curable defaults, which allow Carls to terminate the agreement immediately, include situations such as closing the franchised restaurant for more than 5 days, insolvency, bankruptcy, or having a levy executed on the business or property. Other non-curable defaults include foreclosure, material breach of covenants, transferring the franchise without Carls's prior written consent, material misrepresentation, falsification of reports, and failing to open the franchised restaurant within 60 days after authorization. Further non-curable defaults are imminent danger to public health or safety, loss of possession of the franchised location, a felony conviction, breach of representation or warranty, default beyond the cure period under other agreements with Carls or its affiliates, default after receiving two or more notices of default within the previous 12 months, and receiving a second consecutive failing score on an inspection.

These termination conditions are typical in franchising, as they protect the brand's reputation and ensure franchisees adhere to the standards and agreements set forth by the franchisor. Prospective Carls franchisees should carefully review Section 21 of the Franchise Agreement to fully understand their obligations and the circumstances under which their franchise can be terminated. Understanding these conditions is crucial for maintaining a successful and compliant franchise operation with Carls.