What factors may Carls Jr. consider when deciding whether to consent to a proposed transfer?
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, Carls Jr. has sole discretion in consenting to a proposed transfer of a franchise. While the factors are numerous and deemed relevant by Carls Jr., they generally focus on the transferee's capabilities and the financial implications of the transfer.
The most important factor is whether the proposed transferee can demonstrate extensive experience in high-quality restaurant operations similar to Carls Jr. Restaurants. The transferee must meet Carls Jr.'s standards for a franchisee regarding managerial, operational, experience, quality, character, and business standards. They must also have a good character, business reputation, and credit rating, and their management culture must align with Carls Jr.'s. Critically, the transferee must possess adequate financial resources and working capital to meet the obligations outlined in the Franchise Agreement.
Carls Jr. also considers the financial implications of the transfer itself. If the transfer involves a sale, the sales price cannot be so high that it jeopardizes the transferee's ability to successfully operate the franchise, meet financial obligations to Carls Jr., and pay third-party suppliers and creditors. Carls Jr. emphasizes that its decision regarding a transfer does not create any liability for the company, either to the transferee if they experience financial difficulties after the transfer or to the franchisee or proposed transferee if Carls Jr. withholds consent for the transfer. The transferor also remains liable for all obligations to Carls Jr. incurred before the transfer date and must execute any instruments to evidence that liability.