Under the Carls franchise agreement, does CJR's decision regarding a proposed transfer create any liability on CJR's part to the transferee if CJR consents to the transfer and the transferee experiences financial difficulties?

According to Carls's 2024 Franchise Disclosure Document, CJR's decision regarding a proposed transfer does not create liability on CJR's part to the transferee if CJR consents to the transfer and the transferee experiences financial difficulties. The FDD states that CJR's decision with respect to a proposed Transfer shall not create any liability on the part of CJR to the transferee, if CJR consents to the Transfer and the transferee experiences financial difficulties.

This means that if Carls approves a transfer to a new franchisee, and that franchisee later struggles financially, Carls is not liable for those financial difficulties. This clause protects Carls from being held responsible for the transferee's business performance after the transfer is completed.

This provision is typical in franchise agreements, as franchisors generally do not want to be held liable for the success or failure of individual franchisees, especially after a transfer where the new franchisee's management and operational skills will determine the restaurant's performance. Prospective franchisees should carefully consider this clause and conduct their own due diligence on the business before agreeing to a transfer.