What happens to the Development Fee if the Carls Jr. Development Agreement is terminated?

According to the 2025 Carls Jr. Franchise Disclosure Document, if the Development Agreement is terminated, Carls Jr. retains the Development Fee. This includes any remaining unused balance that is on account with Carls Jr. at the time of termination.

This means that a prospective Carls Jr. developer should carefully consider the development schedule and their ability to meet it. The Development Fee is non-refundable, so failure to meet the development obligations will result in the loss of the fee. This could be a significant financial risk, especially for developers planning a large number of restaurants.

Franchisors typically use development fees to offset their initial costs of providing support and resources to new developers. By retaining the fee upon termination, Carls Jr. is ensuring they are compensated for their initial investment, even if the developer does not fulfill their development obligations. This is a fairly standard practice in the franchise industry, as it protects the franchisor's investment in setting up the developer.

Therefore, it is crucial for potential Carls Jr. developers to conduct thorough due diligence, assess their financial capabilities, and carefully review the Development Agreement to fully understand the terms and conditions related to the Development Fee and termination.