What are some examples of non-curable defaults that could lead to termination of a Carls Jr. franchise agreement?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Franchise | Summary | |
|---|---|---|---|
| Agreement | |||
| c. | Requirements for you to renew or extend d. Termination by you | Section 2.B. Not Applicable | In order to renew at the end of the Initial Term you must: give timely notice; sign general release; comply with training requirements; be in good standing; not be in default under any agreement with us and our affiliates; not be in default beyond the cure period under any real estate or equipment lease or financing instrument relating to the Franchised Restaurant or any agreement with any vendor or supplier to the Franchised Restaurant; have the right to remain in possession of the Franchised Location for the Renewal Term; remodel in accordance with our then-current standards; and pay a renewal fee. You must also sign our then-current form of Franchise Agreement, the terms of which likely will differ from your original Franchise Agreement, including, without limitation, those relating to royalty fees and advertising obligations. |
| e. | Termination by us without cause | Not Applicable | |
| f. | Termination by us with cause | Section 21 | We may terminate upon default, which includes, but is not limited to, remaining in default beyond any applicable cure period under any agreement with us or our affiliates, including any Development Agreement. |
| g. "Cause" defined– curable defaults | Section 21.B. | You have 10 days to cure monetary defaults. You have 30 days to cure all other defaults except those discussed in paragraph h. below. | |
| h. "Cause" defined – non curable defaults | Sections 21.A., 21.B.(3) & 21.C. | Non-curable defaults include: closure of Franchised Restaurant for more than 5 days; insolvency; bankruptcy; execution levied on your business or property; foreclosure; material breach of covenants; transfer without our prior written consent; material misrepresentation; falsification of reports; failure to open Franchised Restaurant within 60 days after opening is authorized; imminent danger to public health or safety; loss of possession of Franchised Location; felony conviction; breach of representation or warranty; default beyond cure period under other agreements with us or our affiliates; default after receipt of 2 or more notices of default within previous 12 months; and receipt of second consecutive failing score on an inspection. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 61–66)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, certain defaults are considered non-curable and can lead to immediate termination of the franchise agreement. These are serious breaches where Carls Jr. believes the damage is irreparable, justifying immediate termination without an opportunity for the franchisee to correct the issue.
Some examples of non-curable defaults include: closing the franchised restaurant for more than 5 days, becoming insolvent or declaring bankruptcy, having an execution levied on the business or property, facing foreclosure, committing a material breach of covenants, transferring the franchise without prior written consent from Carls Jr., making a material misrepresentation, falsifying reports, failing to open the franchised restaurant within 60 days after authorization, creating an imminent danger to public health or safety, losing possession of the franchised location, being convicted of a felony, breaching a representation or warranty, defaulting beyond the cure period under other agreements with Carls Jr. or its affiliates, defaulting after receiving two or more notices of default within the previous 12 months, and receiving a second consecutive failing score on an inspection.
These non-curable defaults represent significant risks for a Carls Jr. franchisee. The occurrence of any of these events provides Carls Jr. with the right to terminate the franchise agreement immediately, resulting in the loss of the franchise and potentially significant financial repercussions. Prospective franchisees should carefully consider these potential pitfalls and ensure they have the resources and capabilities to avoid such defaults. It is also important to note that the list is not exhaustive, and other actions could potentially be deemed non-curable defaults at the discretion of Carls Jr.