For Carls Jr., what constitutes a default of the Franchise Agreement regarding funds in the franchisee's account?
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, a franchisee's failure to maintain sufficient funds in their designated account for electronic funds transfer payments constitutes a default of the Franchise Agreement. This applies to payments for royalty fees, advertising fees, and any other amounts owed to Carls Jr. under the agreement.
Carls Jr. requires franchisees to comply with specific procedures for electronic funds transfers, as outlined in the Operations Procedure Manual (OPM) or other written instructions. Franchisees must sign and deliver an ACH form (Appendix H) upon signing the Franchise Agreement and take any necessary actions to facilitate payment via electronic funds transfer.
This provision is significant because it emphasizes the importance of timely payments to Carls Jr. and the franchisee's responsibility to ensure funds are available when due. Franchisees cannot withhold payments due to alleged non-performance by Carls Jr. or for any other reason. Failing to meet these financial obligations can lead to a default of the agreement, potentially resulting in penalties or termination of the franchise.