If a Carls Jr. franchisee proposes a transfer, does CJR have a right of first refusal?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
e rights and duties set forth in this Agreement are personal to Franchisee and that CJR has entered into this Agreement in reliance on Franchisee's (and Franchisee's direct and indirect owners') business skill, financial capacity, personal character, experience and demonstrated or purported ability in developing and operating high quality foodservice operations. Accordingly, neither Franchisee nor any immediate or remote successor to any part of Franchisee's interest in this Agreement, nor any individual, partnership, corporation or other legal entity which directly or indirectly has an interest in Franchisee shall sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any direct or indirect interest in Franchisee, this Agreement, the Franchise, the Franchised Restaurant, the assets of the Franchised Restaurant, the Franchised Location or any other assets pertaining to Franchisee's operations under this Agreement (collectively "Transfer") without the prior written consent of CJR, unless otherwise permitted by this Section.
Except as otherwise provided in this Agreement, any purported Transfer, by operation of law or otherwise, not having the prior written consent of CJR shall be null and void and shall constitute a material breach of this Agreement, for which CJR may terminate this Agreement without providing Franchisee an opportunity to cure the breach.
- B. Franchisee shall advise CJR in writing of any proposed Transfer, submit (or cause the proposed transferee to submit) a franchise application for the proposed transferee, submit a copy of all contracts and all other agreements or proposals and submit all other information requested by CJR relating to the proposed Transfer. If CJR does not exercise its right of first refusal pursuant to Section 18.J., the decision as to whether or not to consent to a proposed Transfer shall be made by CJR in its sole discretion and shall include numerous factors deemed relevant by CJR. These factors may include, but will not be limited to, the following:
- (1) The proposed transferee (and if the proposed transferee is not a natural person, all persons that have any direct or indirect interest in the transferee as CJR may require) must demonstrate to CJR's satisfaction extensive experience in high quality restaurant operations of a character and complexity similar to Carl's Jr. Restaurants; must meet the managerial, operational, experience, quality, character and business standards for a franchisee promulgated by CJR from time to time; must possess a good character, business reputation and credit rating; must have an organization whose management culture is compatible with CJR's management culture; and must have adequate financial resources and working capital, as determined by CJR in its sole discretion, to meet Franchisee's obligations under this Agreement.
- (2) If the Transfer is a sale, the sales price shall not be so high, in CJR's reasonable judgment, as to jeopardize the ability of the transferee to develop, maintain, operate and promote the Franchised Restaurant and meet financial obligations to CJR, third party suppliers and creditors. CJR's decision with respect to a proposed Transfer shall not create any liability on the part of CJR: (a) to the transferee, if CJR consents to the Transfer and the transferee experiences financial difficulties; or (b) to Franchisee or the proposed transferee, if CJR withholds consent to the Transfer. CJR, without any liability to Franchisee or the proposed transferee, has the right, in its sole discretion, to communicate and counsel with Franchisee and the proposed transferee regarding any aspect of the proposed Transfer.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, CJR (Carls Jr. Restaurants LLC) has a right of first refusal regarding any proposed transfer of a franchise. If a franchisee intends to transfer their franchise, they must inform CJR in writing and provide all relevant details about the proposed transfer, including a franchise application from the potential transferee, copies of all contracts, agreements, proposals, and any other information CJR requests.
If CJR chooses not to exercise its right of first refusal, the decision to approve or deny the transfer remains at CJR's sole discretion. CJR will consider various factors, including the transferee's experience in high-quality restaurant operations, their ability to meet managerial, operational, and business standards, their character, business reputation, credit rating, compatibility with CJR's management culture, and their financial resources. If the transfer involves a sale, CJR will also assess whether the sales price could jeopardize the transferee's ability to successfully operate the franchise and meet their financial obligations.
Carls Jr.'s decision regarding the transfer does not create any liability for CJR, whether it consents to the transfer and the transferee faces financial difficulties, or if CJR withholds consent. Furthermore, if CJR declines to exercise its right of first refusal, the franchisee cannot transfer the interest at a lower price or on more favorable terms than those initially offered to CJR. If the transaction does not close within six months after CJR's decision not to exercise its right of first refusal, CJR is again entitled to a right of first refusal. The franchisee cannot offer the interest for sale or transfer at a public auction or advertise the sale without CJR's prior written consent.
CJR's consent to a transfer does not waive any claims CJR may have against the transferring party, nor does it waive CJR's right to demand compliance with the agreement's terms from the transferee or its right to approve or deny future transfers. CJR also has the right to communicate with both the franchisee and the proposed transferee regarding any aspect of the proposed transfer, without incurring any liability. This comprehensive process ensures that Carls Jr. maintains control over who operates its franchises and protects the integrity of the brand.