What assets can Carls Jr. purchase upon expiration or termination of the franchise agreement?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
- A. Upon the expiration or termination of this Agreement for any reason, CJR will have the option to purchase from Franchisee some or all of the assets used in the Franchised Restaurant ("Assets"). CJR may exercise its option by giving written notice to Franchisee at any time following expiration or termination up until 60 days after the later of: (1) the effective date of termination or expiration; or (2) the date Franchisee ceases to operate the Franchised Restaurant. As used in this Section 23, "Assets" shall mean and include, without limitation, leasehold improvements, equipment, vehicles, furnishings, fixtures, signs and inventory (non-perishable products, materials and supplies) used in the Franchised Restaurant, and the real estate fee simple or the lease or sublease for the Franchised Location. CJR shall be entitled to the entry of interlocutory and permanent orders of specific performance by a court of competent jurisdiction if Franchisee fails or refuses to timely meet its obligations under this Section 23.
- B. CJR shall have the unrestricted right to assign this option to purchase the Assets. CJR or its assignee shall be entitled to all customary representations and warranties that the Assets are free and clear (or, if not, accurate and complete disclosure) as to: (1) ownership, condition and title; (2) liens and encumbrances; (3) environmental and hazardous substances; and (4) validity of contracts and liabilities inuring to CJR or affecting the Assets, whether contingent or otherwise.
- C. The purchase price for the Assets ("Purchase Price") shall be their fair market value, (or, for leased assets, the fair market value of Franchisee's lease) determined as of the effective date of purchase in a manner that accounts for reasonable depreciation and condition of the Assets; provided, however, that the Purchase Price shall take into account the termination of this Agreement. Further, the Purchase Price for the Assets shall not contain any factor or increment for any trademark, service mark or other commercial
symbol used in connection with the operation of the Franchised Restaurant nor any goodwill or "going concern" value for the Franchised Restaurant. CJR may exclude from the Assets purchased in accordance with this Section any equipment, vehicles, furnishings, fixtures, signs, and inventory that are not approved as meeting then-current standards for a Carl's Jr. Restaurant or for which Franchisee cannot deliver a Bill of Sale in a form satisfactory to CJR.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, upon the expiration or termination of the franchise agreement, Carls Jr. has the option to purchase certain assets from the franchisee. Carls Jr. can exercise this option by providing written notice to the franchisee within 60 days after the effective date of termination or expiration, or the date the franchisee ceases to operate the restaurant, whichever is later.
The assets that Carls Jr. may purchase include leasehold improvements, equipment, vehicles, furnishings, fixtures, signs, and inventory, specifically non-perishable products, materials, and supplies used in the franchised restaurant. Additionally, Carls Jr. can purchase the real estate fee simple or the lease or sublease for the franchised location. However, Carls Jr. may exclude any assets that do not meet the then-current standards for a Carls Jr. restaurant or for which the franchisee cannot provide a satisfactory bill of sale.
The purchase price for these assets will be their fair market value at the time of purchase, accounting for reasonable depreciation and condition. The purchase price will not include any value attributed to trademarks, service marks, goodwill, or the restaurant's going concern value. If Carls Jr. and the franchisee cannot agree on the fair market value, it will be determined by two professionally certified appraisers, one chosen by each party. If the appraisals differ by more than 10%, a third appraiser will be selected, and the average of the three appraisals will determine the purchase price. Carls Jr. has the right to assign this purchase option to another party.