Besides paying interest, what other recourse does Carls Jr. have if a franchisee's payment is overdue?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
In connection with payment of the royalty fee, advertising fees, or other amounts payable under this Agreement by electronic funds transfer, Franchisee shall: (1) comply with procedures specified by CJR in the OPM or otherwise in writing; (2) concurrent with the execution of this Agreement, sign and deliver the ACH form attached as Appendix H; (3) perform those acts and sign and deliver any other documents as may be necessary to accomplish payment by electronic funds transfer as described in this Section 8.E.; and (4) make sufficient funds available in the Account for withdrawal by electronic funds transfer no later than the Due Date for payment thereof.
Failure by Franchisee to have sufficient funds in the Account shall constitute a default of this Agreement. Franchisee shall not be entitled to set off, deduct or otherwise withhold any royalty fees, advertising contributions, interest charges or any other monies payable by Franchisee under this Agreement on grounds of any alleged non-performance by CJR of any of its obligations or for any other reason.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, if a franchisee fails to make payments by the due date, in addition to interest, a failure to have sufficient funds in the account for electronic funds transfer constitutes a default of the agreement.
This means that Carls Jr. can declare the franchisee in default for not having enough funds available for payment via electronic transfer. This is significant because default can trigger further penalties and ultimately lead to termination of the franchise agreement. The franchisee cannot withhold payments for any reason, even if they allege Carls Jr. is not fulfilling its obligations.
This clause highlights the importance of maintaining sufficient funds and adhering to the electronic funds transfer requirements outlined in the agreement and the Operations and Procedures Manual (OPM). Prospective franchisees should be aware of these requirements and ensure they can consistently meet their financial obligations to avoid potential default and further action from Carls Jr.