What control must the Operating Principal have over the Carls Jr. Franchised Restaurant's day-to-day activities and other restaurants in the same geographic market?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
t in other restaurants that are franchised by CJR or its affiliates, the party who owns that interest shall execute, concurrently with this Agreement, a form of cross-guarantee to CJR and its affiliates for the payment of all
obligations for such restaurants, unless waived in writing by CJR in its sole discretion. For purposes of this Agreement, an affiliate of Franchisee is any company controlled, directly or indirectly, by Franchisee or Franchisee's parent or subsidiary.
G. Operating Principal
Franchisee shall designate and retain an individual to serve as the Operating Principal. (If Franchisee is owned by one individual, that individual may serve as the Operating Principal if the individual meets CJR's requirements for an Operating Principal.) The Operating Principal as of the date of this Agreement is identified in Appendix D. The Operating Principal shall meet all of the following qualifications:
- (1) The Operating Principal shall have at least a 10% equity ownership interest in Franchisee or, if Franchisee is a limited partnership, in Franchisee's general partner, unless this requirement is modified by CJR in its sole discretion. This Section 16.G.(1) shall not apply if Franchisee was a publiclyheld entity or a wholly-owned subsidiary of a publicly-held entity as of the date of the first franchise-related agreement between Franchisee and CJR.
- (2) The Operating Principal, at all times, shall be a member of the Continuity Group and, at a minimum, have full control over the day-to-day activities of the Franchised Restaurant and those other restaurants (that are franchised by CJR or its affiliates) operated by Franchisee in the same geographic market as the Franchised Restaurant, including control over the standards of operation and financial performance.
- (3) Unless Franchisee has named and CJR has approved a Multi-Unit Manager:
- (a) The Operating Principal shall devote full-time and best efforts to supervising the operation of the Franchised Restaurant and those other restaurants (that are franchised by CJR or its affiliates) operated by Franchisee in the same geographic market as the Franchised Restaurant and shall not engage in any other business or activity, directly or indirectly, that requires substantial management responsibility.
- (b) Unless waived in writing by CJR, the Operating Principal shall maintain his primary residence within a reasonable driving distance of the Franchised Restaurant.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, the Operating Principal is required to have full control over the day-to-day activities of the franchised restaurant. This control extends to other Carls Jr. restaurants (or those franchised by its affiliates) that the franchisee operates within the same geographic market. This includes maintaining control over the standards of operation and the financial performance of these restaurants.
Unless Carls Jr. has approved a Multi-Unit Manager, the Operating Principal must devote their full-time efforts to supervising the operation of the franchised restaurant and other affiliated restaurants in the same geographic market. They are prohibited from engaging in any other business or activity that demands substantial management responsibility. Furthermore, unless Carls Jr. waives this requirement in writing, the Operating Principal must maintain their primary residence within a reasonable driving distance of the franchised restaurant.
If a franchisee operates Carls Jr. restaurants in multiple geographic markets, an individual meeting the qualifications of an Operating Principal must serve in at least one of those markets. For any markets where the Operating Principal does not meet the specified requirements, the franchisee must designate and retain a Multi-Unit Manager who operates under the supervision of the Operating Principal. This Multi-Unit Manager must also devote their full time and best efforts to supervising the restaurants in their designated geographic market and must live within a reasonable driving distance of the franchised restaurant, unless otherwise waived by Carls Jr.