Does Carls Jr. consider the franchisee's financial capacity when entering into the Franchise Agreement?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
- B. Franchisee shall advise CJR in writing of any proposed Transfer, submit (or cause the proposed transferee to submit) a franchise application for the proposed transferee, submit a copy of all contracts and all other agreements or proposals and submit all other information requested by CJR relating to the proposed Transfer.
If CJR does not exercise its right of first refusal pursuant to Section 18.J., the decision as to whether or not to consent to a proposed Transfer shall be made by CJR in its sole discretion and shall include numerous factors deemed relevant by CJR.
These factors may include, but will not be limited to, the following:
- (1) The proposed transferee (and if the proposed transferee is not a natural person, all persons that have any direct or indirect interest in the transferee as CJR may require) must demonstrate to CJR's satisfaction extensive experience in high quality restaurant operations of a character and complexity similar to Carl's Jr.
Restaurants; must meet the managerial, operational, experience, quality, character and business standards for a franchisee promulgated by CJR from time to time; must possess a good character, business reputation and credit rating; must have an organization whose management culture is compatible with CJR's management culture; and must have adequate financial resources and working capital, as determined by CJR in its sole discretion, to meet Franchisee's obligations under this Agreement.
- (2) If the Transfer is a sale, the sales price shall not be so high, in CJR's reasonable judgment, as to jeopardize the ability of the transferee to develop, maintain, operate and promote the Franchised Restaurant and meet financial obligations to CJR, third party suppliers and creditors.
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, Carls Jr. does consider a franchisee's financial capacity when evaluating a potential transfer of ownership. Specifically, if a franchisee wishes to transfer their franchise to a new owner, Carls Jr. assesses whether the proposed transferee has adequate financial resources and working capital to meet the obligations outlined in the Franchise Agreement. This evaluation is conducted at Carls Jr.'s sole discretion.
Carls Jr. also considers whether the sales price of the franchise is reasonable, so that the new franchisee will still be able to develop, maintain, operate, and promote the Carls Jr. restaurant while meeting financial obligations to Carls Jr., third-party suppliers, and creditors.
Carls Jr. makes it clear that their decision regarding a proposed transfer does not create any liability on their part. This means that if Carls Jr. consents to a transfer and the new franchisee experiences financial difficulties, Carls Jr. is not liable to the transferee. Similarly, if Carls Jr. withholds consent to a transfer, they are not liable to either the original franchisee or the proposed transferee.