Under the Carls franchise agreement, can a franchisee withhold royalty fees due to alleged non-performance by CJR?

According to the 2024 Carls Franchise Disclosure Document, a franchisee is not entitled to withhold royalty fees, advertising contributions, interest charges, or any other monies payable under the agreement, even if they allege non-performance by Carls. This means that regardless of any issues a franchisee may perceive with Carls fulfilling its obligations, they are still legally bound to pay all required fees in a timely manner. Failure to do so constitutes a default of the agreement.

This provision protects Carls' revenue stream and ensures consistent payments from franchisees, regardless of disputes. It is a fairly standard clause in franchise agreements, as franchisors rely on these fees to maintain their operations and provide support to the franchise system.

For a prospective Carls franchisee, this means they must have sufficient funds available to cover all fees, even if they believe Carls is not meeting its obligations. Failure to pay can lead to penalties, legal action, and potential termination of the franchise agreement. If a franchisee has concerns about Carls' performance, they should address them through proper channels, such as written complaints or legal consultation, but they cannot unilaterally withhold payments.