Does the Carls Jr. franchise agreement allow for recovery of consequential, punitive, or exemplary damages?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
CKR HAVE NO LIABILITY TO FRANCHISEE FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL, INCIDENTAL OR PUNITIVE DAMAGES WITH RESPECT TO ITS OBLIGATIONS UNDER THIS AGREEMENT OR OTHERWISE, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF THOSE DAMAGES. CKR WILL NOT BE RESPONSIBLE FOR ANY LOSS OF BUSINESS, LOSS OF PROFIT OR OTHER FINANCIAL LOSS BY FRANCHISEE DURING THE PERIOD IN WHICH THE LICENSED PRODUCTS ARE INOPERATIVE, NOR WILL CKR BE RESPONSIBLE FOR ANY LOSS OR INACCURACY OF DATA CAUSED BY THE LICENSED PRODUCTS. IN ANY EVENT, THE LIABILITY OF CKR TO FRANCHISEE FOR ANY REASON AND UPON ANY CAUSE OF ACTION SHALL BE LIMITED TO THE AMOUNT PAID TO CKR BY FRANCHISEE UNDER THIS AGREEMENT DURING THE TRAILING 12 MONTH PERIOD. THIS LIMITATION APPLIES TO ALL CAUSES OF ACTION IN THE AGGREGATE, INCLUDING, WITHOUT LIMITATION, BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATIONS AND OTHER TORTS. THE FEES IN THIS AGREEMENT REFLECT, AND ARE SET IN RELIANCE UPON, THIS ALLOCATION OF RISK AND THE EXCLUSION OF CONSEQUENTIAL DAMAGES SET FORTH IN THIS AGREEMENT.
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, the agreement includes a limitation of liability that impacts a franchisee's ability to recover certain types of damages. Specifically, Carls Jr. states they have no liability to the franchisee for consequential, exemplary, special, incidental, or punitive damages. This limitation applies regardless of whether Carls Jr. was advised of the possibility of such damages.
This means that if a Carls Jr. franchisee experiences losses beyond direct damages (e.g., lost profits due to a breach of contract by Carls Jr.), they will likely be unable to recover those additional losses from the franchisor. The FDD states that Carls Jr. will not be responsible for any loss of business, loss of profit, or other financial loss by franchisee during the period in which the Licensed Products are inoperative, nor will CKR be responsible for any loss or inaccuracy of data caused by the Licensed Products.
The liability of Carls Jr. to the franchisee is limited to the amount paid to Carls Jr. by franchisee under the agreement during the trailing 12 month period. This limitation applies to all causes of action in the aggregate, including, without limitation, breach of contract, breach of warranty, negligence, strict liability, misrepresentations and other torts. The fees in the agreement reflect, and are set in reliance upon, this allocation of risk and the exclusion of consequential damages set forth in this agreement. Prospective franchisees should carefully consider this limitation of liability and its potential impact on their business before investing in a Carls Jr. franchise.
This type of clause is relatively common in franchise agreements, as franchisors seek to manage their potential financial exposure. However, the specific scope and limitations can vary significantly between different franchise systems. Therefore, it is crucial for prospective franchisees to understand the implications of such clauses and seek legal counsel to assess their rights and obligations.