If a Carls Jr. franchisee pays a Development Fee, is it refundable?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
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Other than these nine (9) actions, no litigation is required to be disclosed in this Item.
ITEM 4 BANKRUPTCY
No bankruptcy is required to be disclosed in this Item.
ITEM 5 INITIAL FEES
Development Fee
If you enter into a Development Agreement for the development of three (3) or more Franchised Restaurants to be located at Travel Center Locations or Gas and Convenience Locations, you must pay CJR a Development Fee of $10,000 for each Franchised Restaurant you agree to develop at the time you sign the Development Agreement (this includes the CJR 2024 Travel Center Development Incentive Program). The Development Fee is not refundable. If you execute a Franchise Agreement for a new Franchised Restaurant pursuant to the Development Agreement, the $10,000 Development Fee associated with this new Franchised Restaurant will be credited against the Initial Franchise Fee for such Franchised Restaurant. If you enter into a Development Agreement, you will execute the form of Franchise Agreement in use at the time you begin to develop the Franchised Restaurant and the respective CJR 2024 Travel Center Development Incentive Program Addendum or 2024 DIP Addendum, if applicable.
Initial Franchise Fee
The Initial Franchise Fee is $25,000, although the balance of the Initial Franchise Fee due to CJR is reduced to $15,000 for a Franchised Restaurant developed pursuant to the terms of a Development Agreement, including any Conversion Restaurant. You must pay CJR the Initial Franchise Fee, less any Development Fee already paid, when you execute the Franchise Agreement. The Initial Franchise Fee is fully earned by CJR when paid, and it is not refundable.
Source: Item 5 — INITIAL FEES (FDD pages 26–28)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, the Development Fee is non-refundable. If a franchisee enters into a Development Agreement for three or more restaurants at Travel Center or Gas and Convenience locations, they must pay a $10,000 Development Fee for each restaurant. This fee is paid when the Development Agreement is signed and is not refundable.
However, the FDD states that if the franchisee executes a Franchise Agreement for a new restaurant under the Development Agreement, the $10,000 Development Fee associated with that restaurant will be credited towards the Initial Franchise Fee. The Initial Franchise Fee is $25,000, but is reduced to $15,000 for restaurants developed under a Development Agreement. Therefore, the Development Fee acts as a partial pre-payment of the Initial Franchise Fee.
This arrangement is fairly common in franchising, where development fees secure the rights to open multiple locations. While the fee itself is non-refundable, its application towards the initial franchise fee reduces the overall financial burden upon opening each location, provided the franchisee fulfills the development agreement.