What are the Carls Jr. franchisee's obligations regarding the use of approved suppliers in Item 9, and how do these obligations relate to the restrictions on sources of products and services in Item 8?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
Approximately 90% of your purchases or leases of fixtures, furnishings, equipment, décor, signs, food items, ingredients, supplies and other products in connection with the establishment of the Franchised Restaurant must be purchased in accordance with our specifications or from approved suppliers. We estimate that these items represent approximately 65% of your controllable purchases, excluding labor and general administrative costs in connection with the ongoing operation of the Franchised Restaurant. We do not provide material benefits (e.g., renewal or additional franchises) to you based on use of designated or approved suppliers.
You must also participate in any online ordering/delivery and loyalty programs that we may establish from time to time with approved vendors and you must comply with the rules and participation criteria applicable to these programs, including our loyalty program. We have currently designated OLO as the sole software platform provider for our online ordering program, Punchh as the sole software platform for our loyalty program, and have partnered with designated service providers for our delivery program. Under our online ordering/delivery programs, we require you to accept and process specific customer delivery orders and we require you to use all approved third-party delivery service providers, currently Uber Eats, Door Dash, and GrubHub if those delivery service providers operate in your restaurant's serviceable area. We must pre-approve all delivery service providers not already designated as approved under our delivery program. In addition, we must pre-approve all sales recording processes that originate from the delivery service providers. We have the right to modify the participation criteria or discontinue these initiates at any time upon written notice to you. See also Item 11.
Approval of a supplier or a distributor may be conditioned on requirements relating to the frequency of delivery, reporting capabilities, standards of service, including prompt attention to complaints, sanitation standards, facility standards, insurance and other quality assurance requirements or other criteria, and concentration of purchases, as set forth above, and such approval may be temporary pending a further evaluation of the supplier by us. A fee not to exceed our actual costs of reviewing the supplier or distributor and auditing the facility, if needed, may be charged by us and must be paid by you.
Franchisee agrees that the Franchised Restaurant will: (1) purchase those food products developed by CJR pursuant to a special recipe or formula only from CJR, an affiliate of CJR or a third party designated and licensed by CJR to prepare and sell such products; and (2) purchase from manufacturers, distributors, vendors and suppliers (collectively "suppliers") approved by CJR all other goods, food products, ingredients, spices, seasonings, mixes, beverages, materials, supplies and cleaning products used in the preparation of products and cleanliness of the Franchised Restaurant (collectively "goods"), as well as advertising materials, furniture, fixtures, equipment, smallwares, menus, forms, paper
What This Means (2025 FDD)
According to Carls Jr.'s 2025 Franchise Disclosure Document, franchisees are obligated to purchase certain products and supplies from approved suppliers. Item 8 specifies that approximately 90% of purchases or leases of fixtures, furnishings, equipment, décor, signs, food items, ingredients, supplies, and other products must be from approved suppliers or in accordance with Carls Jr.'s specifications. These items account for about 65% of a franchisee's controllable purchases, excluding labor and administrative costs.
Carls Jr. may approve one or more suppliers or distributors for any products, equipment, goods, or materials, and this approval can be limited to specific items. The approval of suppliers may depend on factors such as delivery frequency, reporting capabilities, service standards, sanitation, facility standards, insurance, quality assurance, and purchase volume. Carls Jr. may also charge a fee to cover the costs of reviewing and auditing suppliers. Furthermore, franchisees must participate in online ordering, delivery, and loyalty programs established by Carls Jr. with approved vendors, adhering to the program's rules and criteria.
Item 22 reinforces these obligations, stating that franchisees must purchase food products developed by Carls Jr. from the company, its affiliates, or designated third parties. All other goods, food products, ingredients, supplies, and cleaning products must be purchased from approved suppliers that meet Carls Jr.'s standards and specifications. Carls Jr. retains the right to require franchisees to use only certain brands and prohibit others, and the list of approved brands and suppliers can be modified at any time. Franchisees are required to comply with these modifications upon written notice.
These restrictions are in place to maintain the quality, consistency, and reputation of the Carls Jr. brand. By mandating the use of approved suppliers, Carls Jr. aims to ensure that all restaurants meet the company's standards for products, services, and overall operations. While these requirements limit a franchisee's autonomy in sourcing products, they also provide access to negotiated prices and terms, as well as potential revenue-sharing incentives through approved vendors like Wasserstrom Holdings, Inc. for equipment, smallwares, and supplies.