Does the Carls Jr. franchise agreement create a fiduciary relationship between the parties?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
This Agreement does not create a fiduciary or other special relationship between the parties. No agency, employment, or partnership is created or implied by the terms of this Agreement, and Franchisee is not and shall not hold itself out as agent, legal representative, partner, subsidiary, joint venturer or employee of CJR or its affiliates or a joint employer with CJR or its affiliates. Franchisee shall have no right or power to, and shall not, bind or obligate CJR or its affiliates in any way or manner, nor represent that Franchisee has any right to do so. Franchisee shall not issue any press releases without the prior written approval of CJR.
Franchisee is an independent contractor and is solely responsible for all aspects of the development and operation of the Franchised Restaurant, subject only to the conditions and covenants established by this Agreement. Without limiting the generality of the foregoing, Franchisee acknowledges that CJR has no responsibility to ensure that the Franchised Restaurant is developed and operated in compliance with all applicable laws, ordinances and regulations and that CJR shall have no liability in the event the development or operation of the Franchised Restaurant violates any law, ordinance or regulation.
The sole relationship between Franchisee and CJR is a commercial, arms' length business relationship and, except as provided in Section 25, there are no third party beneficiaries to this Agreement. Franchisee's business is, and shall be kept, totally separate and apart from any that may be operated by CJR. In all public records, in relationships with other persons, and on letterheads and business forms, Franchisee shall indicate its independent ownership of the Franchised Restaurant and that Franchisee is solely a franchisee of CJR. Franchisee shall post a sign in a conspicuous location in the Franchised Restaurant which will contain Franchisee's name and state that the Franchised Restaurant is independently owned and operated by Franchisee under a franchise agreement with CJR.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, the franchise agreement explicitly states that it does not create a fiduciary or other special relationship between Carls Jr. and the franchisee. The agreement clarifies that no agency, employment, or partnership is created or implied by the terms of the agreement. The franchisee is considered an independent contractor and is solely responsible for all aspects of the development and operation of the franchised restaurant, subject only to the conditions and covenants established by the agreement.
This means that the relationship between Carls Jr. and its franchisees is a commercial, arms-length business relationship. Franchisees are not considered agents, legal representatives, partners, subsidiaries, joint venturers, or employees of Carls Jr. Franchisees cannot bind or obligate Carls Jr. in any way and must represent themselves as independent owners of their franchised restaurant. This is further reinforced by the requirement that franchisees post a sign in a conspicuous location within the restaurant indicating independent ownership and operation under a franchise agreement with Carls Jr.
The explicit disclaimer of a fiduciary relationship is a common practice in franchising. A fiduciary relationship typically implies a higher level of trust and responsibility, where one party (the franchisor) has a duty to act in the best interests of the other party (the franchisee). By disclaiming this relationship, Carls Jr. clarifies that the franchisee is responsible for their own business decisions and outcomes, subject to the terms of the franchise agreement.
Prospective Carls Jr. franchisees should understand that they are entering into a business relationship where they are responsible for their own success and compliance with all applicable laws and regulations. While Carls Jr. provides a franchise system and brand, it is ultimately the franchisee's responsibility to manage and operate their restaurant effectively. This understanding is crucial for franchisees to manage their expectations and responsibilities within the Carls Jr. franchise system.