Upon termination or expiration of the Carls franchise agreement, what is the first action the franchisee must take?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
- F. Unless CJR directs Franchisee to temporarily maintain the existing appearance of the Franchised Location while CJR determines if it will exercise its option under Section 23, Franchisee
promptly shall make such alterations and modifications to the Franchised Location as may be necessary to clearly distinguish to the public the Franchised Location from its former appearance and also make those specific additional changes as CJR may request for that purpose. If Franchisee fails to promptly make these alterations and modifications, CJR shall have the right (at Franchisee's expense, to be paid upon Franchisee's receipt of an invoice from CJR) to do so without being guilty of trespass or other tort.
- G. Franchisee shall furnish CJR, within 30 days after the effective date of termination or expiration, evidence (certified to be true, complete, accurate and correct by an authorized officer of Franchisee) satisfactory to CJR of Franchisee's compliance with Sections 22.A. through 22.F.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to the 2024 Carls FDD, upon termination or expiration of the franchise agreement, the franchisee must promptly make alterations and modifications to the Franchised Location to clearly distinguish it from its former appearance, unless Carls directs the franchisee to temporarily maintain the existing appearance while Carls determines if it will exercise its option to purchase the location. These changes should also include any specific additional changes that Carls may request for that purpose. If the franchisee does not promptly make these alterations and modifications, Carls has the right to do so at the franchisee's expense, which the franchisee must pay upon receipt of an invoice from Carls.
This requirement ensures that the public does not associate the location with the Carls brand after the franchise agreement ends. It protects Carls' brand identity and prevents potential confusion among customers. The franchisee is responsible for the costs associated with these alterations, which could include repainting, removing signage, and changing the overall look of the restaurant.
Franchisees should be aware of this obligation and factor in the potential costs when considering the franchise opportunity. It is also important to communicate with Carls to understand the specific alterations required and the timeline for completing them. This will help avoid any disputes or additional expenses related to Carls making the changes themselves at the franchisee's cost. Franchisees must also furnish Carls with evidence of compliance with these obligations within 30 days of termination or expiration, certified by an authorized officer of the franchisee.