What are the consequences for a Carls Jr. developer if they are insolvent or file for bankruptcy?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
In addition to the grounds for termination that may be stated elsewhere in this Agreement, CJR may terminate this Agreement, and the rights granted by this Agreement, upon written notice to Developer without an opportunity to cure upon the occurrence of any of the following events:
(5) Developer is insolvent or is unable to pay its creditors (including CJR); files a petition in bankruptcy, an arrangement for the benefit of creditors or a petition for reorganization; there is filed against Developer a petition in bankruptcy, an arrangement for the benefit of creditors or petition for reorganization, which is not dismissed within 60 days of the filing; Developer makes an assignment for the benefit of creditors; or a receiver or trustee is appointed for Developer and not dismissed within 60 days of the appointment.
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, if a developer becomes insolvent or files for bankruptcy, Carls Jr. has the right to terminate the Development Agreement. Specifically, Carls Jr. can terminate the agreement with written notice and without an opportunity for the developer to remedy the situation.
This means that if a Carls Jr. developer is unable to pay their creditors, including Carls Jr. itself, or if they file for bankruptcy, seek an arrangement for the benefit of creditors, or petition for reorganization, Carls Jr. can immediately terminate the agreement. Additionally, if a petition in bankruptcy, arrangement for creditors, or petition for reorganization is filed against the developer and not dismissed within 60 days, Carls Jr. can also terminate the agreement.
Furthermore, if the developer makes an assignment for the benefit of creditors or has a receiver or trustee appointed for them, and this is not dismissed within 60 days, Carls Jr. reserves the right to terminate the agreement. This clause protects Carls Jr. from potential financial risks associated with a struggling developer and allows them to maintain the integrity and stability of the Carls Jr. brand and system.