What happens if a Carls Jr. developer begins construction before receiving a fully-executed Franchise Agreement and paying the Initial Franchise Fee?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
In addition to the grounds for termination that may be stated elsewhere in this Agreement, CJR may terminate this Agreement, and the rights granted by this Agreement, upon written notice to Developer without an opportunity to cure upon the occurrence of any of the following events:
(4) Developer begins construction of a Franchised Restaurant at a site before Developer has received a fully-executed Franchise Agreement and paid CJR the Initial Franchise Fee.
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, if a developer begins construction of a franchised restaurant before both receiving a fully-executed Franchise Agreement and paying the Initial Franchise Fee to Carls Jr., Carls Jr. has the right to terminate the Development Agreement. This termination can occur without providing the developer an opportunity to correct the situation.
This stipulation protects Carls Jr. by ensuring that developers follow the proper procedures and demonstrate their commitment to the franchise through both a signed agreement and financial investment before starting construction. It also prevents developers from potentially misusing the Carls Jr. brand, system, or proprietary information without proper authorization.
For a prospective Carls Jr. developer, this means it is crucial to adhere strictly to the outlined development procedures. Starting construction prematurely, even with good intentions, can lead to the termination of the Development Agreement and the loss of any investments made up to that point. Developers should ensure all agreements are fully executed and fees are paid before commencing any construction activities to avoid jeopardizing their franchise rights.