What are the Carls Jr. franchisee's obligations regarding advertising and promotion in Item 9, and how do these obligations relate to the franchisor's advertising programs described in Item 11?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
es, room, board and compensation of CJR's employees or designees involved in the audit or inspection. The foregoing remedies shall be in addition to all other remedies and rights available to CJR under this Agreement or applicable law.
If Franchisee fails to provide CJR on a timely basis with the records, reports and other information required by this Agreement or, upon request of CJR, with copies of same, CJR or its designee shall have access at all reasonable times (and as often as necessary) to Franchisee's books and records for the purpose, among other things, of preparing the required records, reports and other information. Franchisee promptly shall reimburse CJR or its designee for all costs and expenses associated with CJR obtaining such records, reports or other information. Franchisee also acknowledges that CJR has the right at any time to communicate directly with Franchisee's lenders, any other creditors, any suppliers and all regulatory authorities regarding Franchisee, Franchisee's business or any aspect of the Franchised Restaurant.
8. ADVERTISING AND PROMOTION
A. Contributions/Expenditures by Franchisee
During the term of this Agreement, Franchisee shall have a weekly advertising and promotion obligation ("APO") in the amount set forth in Section 6.C. and Appendix C. Following written notice to Franchisee, CJR may modify the amount and allocation of the APO subject to the provisions of Section 8.F. Franchisee shall pay, at the same time and in the same manner as the royalty fee, that portion of the APO as CJR may direct to the Production Fund in accordance with Section 8.B. The remainder of the APO shall be paid, at the same time and in the same manner as the royalty fee, to the Media Fund in accordance with Section 8.C.
B. Production Fund
CJR has established, and will maintain and administer a fund for the creation and development of advertising, marketing, social media and public relations, research and related programs, gift card and loyalty programs, activities and materials that CJR, in its sole discretion, deems appropriate ("Production Fund"). Franchisee shall contribute to the Production Fund the amount set forth in Appendix C, as subsequently modified pursuant to Section 8.F. Carl's Jr. Restaurants operated by CJR and its affiliates shall contribute to the Production Fund on the same basis as comparable franchisees.
CJR or its designee shall direct all advertising, marketing, social media and public relations programs and activities financed by the Production Fund, with sole discretion over the creative concepts, materials and endorsements used in those programs and activities, and the geographic, market and media placement and allocation of advertising and marketing materials. Franchisee agrees that the Production Fund may be used among other things to pay the costs of preparing and producing such associated materials and programs as CJR or its designee may determine, including but not limited to video, audio and written advertising materials; employing advertising or activation agencies; administering regional and multiregional advertising programs, including, without limitation, purchasing direct mail, in-App support for third party delivery platforms like Doordash and other media advertising and employing advertising
agencies to assist with these efforts; and supporting public relations, market research and other advertising, promotional and marketing activities.
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, franchisees have a weekly advertising and promotion obligation (APO), the amount of which is detailed in Section 6.C and Appendix C of the franchise agreement. Carls Jr. can modify the amount and allocation of this APO with written notice to the franchisee, as per Section 8.F. A portion of the APO is directed to the Production Fund, while the remainder goes to the Media Fund, both paid at the same time and manner as the royalty fee.
The Production Fund is managed by Carls Jr. for the creation and development of advertising, marketing, social media, public relations, research, gift card and loyalty programs, and related activities. The franchisee's contribution to this fund is specified in Appendix C and can be modified according to Section 8.F. Carls Jr. restaurants also contribute to the Production Fund on the same basis as comparable franchisees. Carls Jr. has sole discretion over the advertising, marketing, and social media programs financed by the Production Fund, including creative concepts and media placement.
Carls Jr. will endeavor to use each fund to develop advertising and marketing materials and programs, and to place advertising that will benefit the System and all Carls Jr. Restaurants contributing to the fund. However, Franchisee agrees that CJR is not liable to Franchisee and Franchisee forever covenants not to sue and holds CJR harmless of any liability or obligation to ensure that expenditures by each fund in or affecting any geographic area (including the Franchised Location) are proportionate or equivalent to the contributions to the fund by Carl's Jr. Restaurants operating in that geographic area, or that any Carl's Jr. Restaurant will benefit directly or in proportion to its contribution to each fund from the development of advertising and marketing materials or the placement of advertising. Carls Jr. can also suspend or terminate these funds, or transfer monies between the Production Fund and the Media Fund, as it deems appropriate to maximize media effectiveness.
Item 11 outlines Carls Jr.'s obligations during the operation of the franchise, but does not explicitly detail the advertising programs themselves. It mentions that Carls Jr. may modify the Carl's Jr. System, including the menu, signage, and presentation of trademarks. The FDD states that the franchisee must adhere to Carls Jr.'s standards for advertising and promotional programs. While Carls Jr. directs advertising, marketing, social media and public relations programs and activities financed by the Production Fund, the franchisee is responsible for maintaining high standards in the operation of the Franchised Restaurant, including compliance with System specifications related to advertising and promotional programs.