For a Carls Jr. Development Agreement, what minimum equity ownership interest in the Developer (or its general partner if a limited partnership) must the Development Principal have, unless modified by CJR?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
Developer shall designate and retain an individual to serve as the Development Principal. (If Developer is owned by one individual, that individual may serve as the Development Principal if the individual meets CJR's requirements for a Development Principal.) The Development Principal as of the date of this Agreement is identified in Appendix C. The Development Principal shall meet all of the following qualifications:
- (1) The Development Principal shall have at least a 10% equity ownership interest in Developer or, if Developer is a limited partnership, in Developer's general partner, unless this requirement is modified by CJR in its sole discretion. This Section 8.F.(1) shall not apply if Developer 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 Developer and CJR.
- (2) The Development Principal, at all times, shall be a member of the Continuity Group and, at a minimum, have full control over the day-to-day development of Developer's Franchised Restaurants.
- (3) Unless Developer has named and CJR has approved a Multi-Unit Development Manager:
- (a) The Development Principal shall devote full-time and best efforts to supervising the development of Developer's Franchised Restaurants 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 Development Principal shall maintain his primary residence within a reasonable driving distance of the Development Territory.
- (4) If requested by CJR, the Development Principal shall successfully complete CJR's development training. In addition, if requested by CJR, the Development Principal shall successfully complete the Franchise Management Training Program ("FMTP").
- (5) CJR shall have approved the Development Principal, and not have later withdrawn that approval.
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, the Development Principal must have at least a 10% equity ownership interest in the Developer or, if the Developer is a limited partnership, in the Developer's general partner. However, Carls Jr. retains the sole discretion to modify this requirement. This condition does not apply if the Developer was a publicly-held entity or a wholly-owned subsidiary of a publicly-held entity as of the date of the first franchise-related agreement between the Developer and Carls Jr.
Furthermore, the Development Principal must always be a member of the Continuity Group and have full control over the day-to-day development of the Franchised Restaurants. Unless a Multi-Unit Development Manager is approved by Carls Jr., the Development Principal must devote full-time efforts to supervising the development of the Franchised Restaurants and cannot engage in other business activities that require substantial management responsibility. The Development Principal must also maintain their primary residence within a reasonable driving distance of the Development Territory, unless waived in writing by Carls Jr.
Carls Jr. also requires that the Development Principal successfully complete their development training and the Franchise Management Training Program (FMTP) if requested. The Development Principal must be approved by Carls Jr., and this approval cannot be later withdrawn. These stipulations ensure that the Development Principal is qualified, committed, and capable of effectively managing the development of Carls Jr. restaurants within the designated territory.