For a Carls Jr. approval or consent from CJR to be effective and binding, what requirements must it meet?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
ot be required to pay a Transfer fee. CJR's consent also will be conditioned on the following: (1) the corporation (or limited liability company) must be newly organized; (2) prior to the Transfer, CJR must receive a copy of the documents specified in Section 8.B. and the transferee shall comply with the remaining provisions of Section 8; and (3) Developer must own all voting securities of the corporation (or membership interests of the limited liability company) or, if Developer is owned by more than one individual, each person shall have the same proportionate ownership interest in the corporation (or the limited liability company) as prior to the Transfer.
- E. Notwithstanding the provisions of Sections 10.A. and B., the issuance of options or the exercise of options pursuant to a qualified stock option plan or a qualified employee stock ownership plan shall not be considered a Transfer and shall not require the prior written consent of CJR; provided no more than a total of 49% of Developer's outstanding voting securities are subject to the qualified stock option plan or qualified employee stock ownership plan.
- F. If Developer was a publicly-held entity as of the date of the first franchise-related agreement between Developer and CJR or its affiliates, Section 10.B. shall be applicable to transfers of ownership interests in Developer only if the proposed Transfer would result in: (1) 50% or more of Developer's voting securities being held by different shareholders than as of the date of the first franchiserelated agreement between Developer and CJR or its affiliates; or (2) any change in ownership of Developer's voting securities whereby any existing shareholder of Developer acquires an additional 10% or more of Developer's voting securities; or (3) any change in the membership of the Continuity Group (unless such change is a permitted Transfer pursuant to Section 10.G.).
- G. In the event of the death or permanent incapacity of any person with an ownership interest in Developer, CJR shall not unreasonably withhold its consent to a transfer to any person, persons, partnership or corporation designated by his legal representative, provided, however, that:
- (1) The requirements of Section 10.B. and 10.C. shall have been met.
- (2) The proposed transfer is applied for in writing within 2 months of the date of death or permanent incapacity by the legal representative of such individual, and is effected within 6 months thereafter.
- (3) In the case of permanent incapacity, the legal representative shall have furnished a certification of a physician designated by CJR that Developer has been or will be unable to develop or operate any System Restaurants for a period of 6 months or longer.
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, several conditions must be met for CJR's consent to be valid. First, the franchisee must adhere to the requirements outlined in Sections 10.B and 10.C of the agreement. If the transfer occurs due to death or permanent incapacity, the application must be submitted in writing by the legal representative within two months of the event and completed within six months. In cases of permanent incapacity, a physician designated by CJR must certify that the developer is unable to operate the restaurants for at least six months.
Carls Jr.'s consent may also be conditional, requiring the secured party to agree that CJR has the option to purchase their rights if the developer defaults, upon payment of the outstanding sums. If the developer finances any part of the transfer, the financing entity must agree that their obligations and security interests are subordinate to the transferee's obligations to pay all amounts due to CJR and comply with all agreements.
Furthermore, if the developer is transferring to a corporation or limited liability company, the entity must be newly organized. Prior to the transfer, CJR must receive copies of the documents specified in Section 8.B, and the transferee must comply with the remaining provisions of Section 8. The developer must own all voting securities of the corporation or membership interests of the LLC, or if the developer is owned by multiple individuals, each person must maintain the same proportionate ownership interest. The issuance or exercise of options under qualified stock option plans or employee stock ownership plans does not require prior written consent, provided that no more than 49% of the developer's outstanding voting securities are subject to these plans. These stipulations ensure that Carls Jr. maintains control over who operates its franchises and under what conditions.