Is a Carls Jr. franchisee's felony conviction considered a non-curable default?
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, a felony conviction is considered a non-curable default. This means that if a Carls Jr. franchisee is convicted of a felony, Carls Jr. has the right to terminate the franchise agreement immediately without providing an opportunity to cure the default.
This provision is significant for prospective franchisees as it highlights the importance of maintaining a clean criminal record. A felony conviction, regardless of the nature of the crime, can result in the loss of the franchise and the associated investment. This is stricter than many franchise agreements, which may allow a cure period or only consider felonies directly related to the operation of the business.
Other non-curable defaults for Carls Jr. include closure of the 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, 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.
Given the severity of this clause, prospective Carls Jr. franchisees should carefully consider the implications and seek legal counsel to fully understand their rights and obligations under the franchise agreement. They may also want to inquire about the specific types of felonies that would trigger termination and whether any exceptions exist.