In evaluating a proposed Carls Jr. franchise transferee, can CJR consider the transferee's business reputation?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
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, when a franchisee proposes a transfer of their franchise, Carls Jr. has the right to evaluate the proposed transferee. Carls Jr.'s decision to consent to the transfer is at its sole discretion and will include numerous factors deemed relevant by Carls Jr.
These factors include ensuring the proposed transferee demonstrates extensive experience in high-quality restaurant operations similar to Carls Jr. Restaurants. The transferee must also meet Carls Jr.'s standards for managerial, operational, experience, quality, character, and business. A key consideration is that the proposed transferee must possess a good character, business reputation, and credit rating. Additionally, their organization's management culture must align with Carls Jr.'s, and they must have adequate financial resources to meet the obligations of the Franchise Agreement.
Carls Jr. also considers the financial aspects of the transfer, particularly if it involves a sale. The sales price should not be so high that it jeopardizes the transferee's ability to successfully operate the franchise, maintain its standards, and meet financial obligations to Carls Jr., suppliers, and creditors. Carls Jr. emphasizes that its decision regarding the transfer does not create any liability on its part, either to the transferee if they experience financial difficulties after the transfer or to the franchisee and proposed transferee if Carls Jr. withholds consent.