What constitutes a material default that would prevent a Carls Jr. franchisee from transferring their franchise?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
(4) Franchisee is not then in material default of any provision of this Agreement or any other agreement between Franchisee and CJR or its affiliates, is in good standing as a franchisee with CJR and its affiliates, is not in default beyond the applicable cure period under any real estate lease, equipment lease or financing instrument relating to the Franchised Restaurant and is not in default beyond the applicable cure period with any vendor or supplier to the Franchised Restaurant.
(3) All of Franchisee's accrued monetary obligations to CJR and its affiliates (whether arising under this Agreement or otherwise) and all other outstanding obligations related to the Franchised Restaurant (including, but not limited to, bills from suppliers, taxes, judgments and any required governmental reports, returns, affidavits or bonds) have been satisfied or, in the reasonable judgment of CJR, adequately provided for.
CJR reserves the right to require that a reasonable sum of money be placed in escrow to ensure that all of these obligations are satisfied.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, a franchisee cannot transfer their franchise if they are in material default of any provision of the Franchise Agreement or any other agreement between the franchisee and Carls Jr. or its affiliates. The franchisee must also be in good standing with Carls Jr. and its affiliates.
Furthermore, the franchisee cannot be in default beyond the applicable cure period under any real estate lease, equipment lease, or financing instrument relating to the franchised restaurant. Similarly, they cannot be in default beyond the applicable cure period with any vendor or supplier to the franchised restaurant. These conditions ensure that the franchisee has met their financial and operational obligations before transferring the franchise to a new owner.
Carls Jr. also requires that all of the franchisee's accrued monetary obligations to Carls Jr. and its affiliates, whether arising under the Franchise Agreement or otherwise, and all other outstanding obligations related to the franchised restaurant have been satisfied or adequately provided for in the reasonable judgment of Carls Jr. This includes bills from suppliers, taxes, judgments, and any required governmental reports, returns, affidavits, or bonds. Carls Jr. reserves the right to require that a reasonable sum of money be placed in escrow to ensure that all of these obligations are satisfied before a transfer is approved.