What actions by a Carls Jr. franchisee constitute a 'Transfer' requiring CJR's consent?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
e rights and duties set forth in this Agreement are personal to Franchisee and that CJR has entered into this Agreement in reliance on Franchisee's (and Franchisee's direct and indirect owners') business skill, financial capacity, personal character, experience and demonstrated or purported ability in developing and operating high quality foodservice operations. Accordingly, neither Franchisee nor any immediate or remote successor to any part of Franchisee's interest in this Agreement, nor any individual, partnership, corporation or other legal entity which directly or indirectly has an interest in Franchisee shall sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any direct or indirect interest in Franchisee, this Agreement, the Franchise, the Franchised Restaurant, the assets of the Franchised Restaurant, the Franchised Location or any other assets pertaining to Franchisee's operations under this Agreement (collectively "Transfer") without the prior written consent of CJR, unless otherwise permitted by this Section.
Except as otherwise provided in this Agreement, any purported Transfer, by operation of law or otherwise, not having the prior written consent of CJR shall be null and void and shall constitute a material breach of this Agreement, for which CJR may terminate this Agreement without providing Franchisee an opportunity to cure the breach.
- B. Franchisee shall advise CJR in writing of any proposed Transfer, submit (or cause the proposed transferee to submit) a franchise application for the proposed transferee, submit a copy of all contracts and all other agreements or proposals and submit all other information requested by CJR relating to the proposed Transfer. If CJR does not exercise its right of first refusal pursuant to Section 18.J., the decision as to whether or not to consent to a proposed Transfer shall be made by CJR in its sole discretion and shall include numerous factors deemed relevant by CJR. These factors may include, but will not be limited to, the following:
- (1) The proposed transferee (and if the proposed transferee is not a natural person, all persons that have any direct or indirect interest in the transferee as CJR may require) must demonstrate to CJR's satisfaction extensive experience in high quality restaurant operations of a character and complexity similar to Carl's Jr. Restaurants; must meet the managerial, operational, experience, quality, character and business standards for a franchisee promulgated by CJR from time to time; must possess a good character, business reputation and credit rating; must have an organization whose management culture is compatible with CJR's management culture; and must have adequate financial resources and working capital, as determined by CJR in its sole discretion, to meet Franchisee's obligations under this Agreement.
- (2) If the Transfer is a sale, the sales price shall not be so high, in CJR's reasonable judgment, as to jeopardize the ability of the transferee to develop, maintain, operate and promote the Franchised Restaurant and meet financial obligations to CJR, third party suppliers and creditors. CJR's decision with respect to a proposed Transfer shall not create any liability on the part of CJR: (a) to the transferee, if CJR consents to the Transfer and the transferee experiences financial difficulties; or (b) to Franchisee or the proposed transferee, if CJR withholds consent to the Transfer. CJR, without any liability to Franchisee or the proposed transferee, has the right, in its sole discretion, to communicate and counsel with Franchisee and the proposed transferee regarding any aspect of the proposed Transfer.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, a franchisee must advise CJR in writing of any proposed transfer. The franchisee must submit a franchise application for the proposed transferee, a copy of all contracts, agreements, or proposals, and any other information CJR requests relating to the proposed transfer.
If CJR does not exercise its right of first refusal, the decision to consent to a proposed transfer is at CJR's sole discretion. Factors CJR may consider include whether the proposed transferee has extensive experience in high-quality restaurant operations similar to Carls Jr., meets managerial, operational, experience, quality, character, and business standards, possesses a good character, business reputation, and credit rating, has a compatible management culture, and has adequate financial resources and working capital.
If the transfer involves a sale, CJR will consider whether the sales price is so high that it could jeopardize the transferee's ability to operate the Franchised Restaurant and meet financial obligations. CJR's decision regarding a proposed transfer does not create any liability for CJR, either to the transferee if the transfer is approved and the transferee experiences financial difficulties, or to the franchisee or proposed transferee if CJR withholds consent to the transfer.
If a franchisee is an individual or partnership and wants to transfer the agreement to a corporation or limited liability company for ownership convenience, the requirements mentioned above apply, but the franchisee won't have to pay a transfer fee. CJR's consent is conditional on the corporation or LLC being newly organized, CJR receiving copies of required documents, the transferee complying with specific provisions, and the franchisee owning all voting securities or membership interests in the new entity. The issuance or exercise of options under qualified stock option or employee stock ownership plans is not considered a transfer requiring consent, as long as no more than 49% of the franchisee's outstanding voting securities are subject to such plans.