Does CJR have liability to the franchisee for decisions made regarding the Carls Jr. franchise agreement?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
F. Franchisee agrees that no past, present or future director, officer, employee, incorporator, member, partner, stockholder, subsidiary, affiliate, controlling party, entity under common control, ownership or management, vendor, service provider, agent, attorney or representative of CJR will have any liability for: (1) any obligations or liabilities of CJR relating to or arising from this Agreement; (2) any claim against CJR based on, in respect of, or by reason of the relationship between Franchisee and CJR; or (3) any claim against CJR based on any alleged unlawful act or omission of CJR. This provision does not include a release of claims arising from representations in the Carl's Jr. Franchise Disclosure Document provided to Franchisee in connection with this Agreement or any claims arising under any applicable state or federal franchise laws regulating the offer or sale of the franchise for this Agreement (including without limitation the FTC Rule on Franchising (16 C.F.R. Part 436)).
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.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, no past, present, or future director, officer, employee, or affiliate of CJR will have any liability for obligations or liabilities relating to the franchise agreement, claims against CJR based on the relationship between the franchisee and CJR, or claims against CJR based on any alleged unlawful act or omission of CJR. However, this does not release CJR from liability for claims arising from representations made in the Franchise Disclosure Document or claims arising under applicable state or federal franchise laws regulating the offer or sale of the franchise, including the FTC Rule on Franchising.
This means that while Carls Jr. aims to limit the personal liability of its individual representatives and affiliates regarding the franchise agreement, franchisees retain the right to pursue claims against Carls Jr. itself under specific circumstances. These circumstances include misrepresentations in the FDD and violations of franchise laws. This protection is standard in franchising to ensure the franchisor provides accurate information and complies with legal requirements.
Furthermore, the Franchise Agreement specifies that CJR's decision regarding a proposed transfer of the franchise does not create any liability on the part of CJR to the transferee if CJR consents to the transfer and the transferee experiences financial difficulties, or to the franchisee or the proposed transferee if CJR withholds consent to the transfer. This clause protects Carls Jr. from liability related to transfer decisions, regardless of the outcome for the involved parties. However, franchisees should seek legal counsel to fully understand their rights and obligations under the franchise agreement and applicable laws.