If a Carls Jr. franchise agreement is terminated following the franchisee's default, is the franchisee obligated to pay damages to CJR, and if so, how is the amount calculated?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
The amount of such royalty fee during the Damages Period will be calculated by multiplying the average weekly royalty fee owed by Franchisee for the 52-week period prior to the effective date of termination by the number of weeks in the Damages Period.
The obligation to pay this royalty fee survives termination of this Agreement and is in addition to, and not in lieu of, Franchisee's obligation to fully comply with its obligations under Section 20.C. following termination of this Agreement.
- C. Franchisee promptly shall return to CJR the OPM, any copies of the OPM and all other materials and information furnished by CJR and delete all electronic copies of the OPM and all other materials and information furnished by CJR that are in Franchisee's possession.
Franchisee promptly shall return to CJR, in good condition and repair excepting normal wear and tear, all computer software, disks, tapes and other electronic and magnetic storage media.
D. Franchisee and all persons and entities subject to the covenants contained in Section 20 shall continue to abide by those covenants and shall not, directly or indirectly, take any action that violates those covenants.
E. Franchisee immediately shall discontinue all use of the Proprietary Marks in connection with the Franchised Restaurant and of any and all items bearing the Proprietary Marks; remove the Proprietary Marks from the Franchised Restaurant and from clothing, signs, materials, motor vehicles and other items owned or used by Franchisee in the operation of the Franchised Restaurant (unless CJR directs
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, if the franchise agreement is terminated due to franchisee default, the franchisee may be obligated to pay certain amounts to CJR. Specifically, the franchisee may be required to pay a royalty fee for a period after the termination, referred to as the "Damages Period."
The amount of this royalty fee is calculated by determining the average weekly royalty fee owed by the franchisee during the 52-week period prior to the termination date. This average weekly royalty fee is then multiplied by the number of weeks in the Damages Period to arrive at the total amount owed. This obligation to pay the royalty fee survives the termination of the franchise agreement.
In addition to the royalty fee, the franchisee is also obligated to comply with other post-termination obligations, such as returning the Operations and Procedures Manual (OPM) and discontinuing all use of Carls Jr.'s proprietary marks. The franchisee must also adhere to any covenants outlined in Section 20 of the franchise agreement. This royalty fee is not in place of these obligations, but in addition to them.