What are the Carls Jr. franchisee's obligations regarding the payment of royalties and other fees in Item 9, and how do these obligations relate to the franchisor's right to collect those fees as described in Item 6?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
6. FEES
A. Initial Franchise Fee
Franchisee agrees to pay CJR an Initial Franchise Fee in the amount specified in Appendix A upon its execution of this Agreement. Any Development Fee previously paid by Franchisee to CJR with respect to the Franchised Restaurant shall be credited against the Initial Franchise Fee. Franchisee acknowledges and agrees that the Initial Franchise Fee is paid in consideration of CJR initially granting this Franchise, it was fully earned at the time paid, and it is not refundable for any reason whatsoever.
B. Royalty Fee
In addition to all other amounts to be paid by Franchisee to CJR, Franchisee shall pay CJR a nonrefundable and continuing royalty fee in an amount set forth in attached Appendix B for the right to use the System and the Proprietary Marks at the Franchised Location. If any taxes, fees or assessments are imposed on CJR by reason of its acting as franchisor or licensing the Proprietary Marks under this
Agreement, Franchisee shall reimburse CJR the amount of those taxes, fees or assessments within 10 days after receipt of an invoice from CJR.
Gross Sales shall include all revenue from the sale of all services and products (except CJR approved promotional items) and all other income of every kind and nature (excluding revenue from the sale of stored value gift cards or gift certificates but including revenue when gift certificates are redeemed or stored value gift cards are debited) related to the Franchised Restaurant, whether for cash or credit and regardless of collection in the case of credit; provided, however, that Gross Sales shall not include any sales taxes or other taxes collected from customers by Franchisee for transmittal to the appropriate taxing authority.
C. Advertising Fees
Franchisee also shall spend and/or contribute for advertising up to 7% of the Gross Sales of the Franchised Restaurant. The exact amount of the advertising fees to be spent and/or contributed by Franchisee, and the allocation of the advertising fees, as of the date of this Agreement, is set forth in Section 8 and attached Appendix C.
D. Remittance Reports
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, franchisees have several obligations regarding the payment of fees, including an initial franchise fee, royalty fees, and advertising fees. The initial franchise fee is specified in Appendix A and is non-refundable. Franchisees must also pay a continuing royalty fee, detailed in Appendix B, for the right to use the Carls Jr. system and trademarks. Additionally, franchisees are required to spend or contribute up to 7% of gross sales on advertising, with the exact amount and allocation outlined in Section 8 and Appendix C of the agreement. These fees are critical for Carls Jr. to maintain its brand standards, provide ongoing support, and conduct marketing activities.
Carls Jr. has the right to collect these fees, and franchisees must adhere to specific payment procedures. For electronic funds transfers, franchisees must comply with Carls Jr.'s specified procedures, sign an ACH form, and ensure sufficient funds are available for withdrawal on the due date. Failure to maintain sufficient funds constitutes a breach of the agreement. Franchisees are not entitled to withhold payments due to any alleged non-performance by Carls Jr. or for any other reason. This ensures that Carls Jr. receives the necessary funds to support the franchise system and maintain its operational standards.
If franchisees fail to make timely payments, Carls Jr. can charge interest on the outstanding amount, not exceeding 1.5% per fiscal period, in addition to any other available remedies. Carls Jr.'s acceptance of partial payments does not waive its right to demand full payment or any other remedies. Carls Jr. has the discretion to apply any payments to outstanding debts, including royalty fees, advertising contributions, or other indebtedness. Furthermore, franchisees are responsible for covering all costs and expenses incurred by Carls Jr. in enforcing the franchise agreement, including collection agency fees, attorney fees, and court costs. These measures protect Carls Jr.'s financial interests and ensure franchisees meet their financial obligations.
Prospective franchisees should carefully review Appendices A, B, and C, as well as Section 8 of the franchise agreement, to fully understand the specific amounts and allocation of these fees. Understanding these obligations is crucial for assessing the financial viability of a Carls Jr. franchise and ensuring compliance with the franchise agreement.