Does Carls Jr. assume liability to the Developer if the transferee experiences financial difficulties after Carls Jr. consents to the transfer?

According to the 2025 Carls Jr. Franchise Disclosure Document, Carls Jr.'s decision regarding a proposed transfer does not create any liability on its part to the transferee if Carls Jr. consents to the transfer and the transferee subsequently experiences financial difficulties. This means that if a Carls Jr. franchisee (the Developer) transfers their franchise to another party (the transferee) with Carls Jr.'s approval, Carls Jr. is not liable to the new franchisee if they face financial problems later on.

This provision protects Carls Jr. from potential lawsuits or financial claims arising from the transferee's business operations after the transfer has been completed. It makes it the responsibility of the Developer to assess the financial capabilities and business acumen of the proposed transferee.

For a prospective Carls Jr. franchisee, this clause highlights the importance of carefully evaluating potential transferees if they plan to sell their franchise in the future. While Carls Jr. has its own criteria for approving transfers, the Developer ultimately bears the risk if the transferee's business fails after the transfer. This underscores the need for thorough due diligence and potentially securing guarantees or other forms of security from the transferee to mitigate potential losses.