What is included in the definition of 'Assets' that Carls Jr. can purchase?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
23. OPTION TO PURCHASE
- A. Upon the expiration or termination of this Agreement for any reason, CJR will have the option to purchase from Franchisee some or all of the assets used in the Franchised Restaurant ("Assets"). CJR may exercise its option by giving written notice to Franchisee at any time following expiration or termination up until 60 days after the later of: (1) the effective date of termination or expiration; or (2) the date Franchisee ceases to operate the Franchised Restaurant. As used in this Section 23, "Assets" shall mean and include, without limitation, leasehold improvements, equipment, vehicles, furnishings, fixtures, signs and inventory (non-perishable products, materials and supplies) used in the Franchised Restaurant, and the real estate fee simple or the lease or sublease for the Franchised Location. CJR shall be entitled to the entry of interlocutory and permanent orders of specific performance by a court of competent jurisdiction if Franchisee fails or refuses to timely meet its obligations under this Section 23.
- B. CJR shall have the unrestricted right to assign this option to purchase the Assets. CJR or its assignee shall be entitled to all customary representations and warranties that the Assets are free and clear (or, if not, accurate and complete disclosure) as to: (1) ownership, condition and title; (2) liens and encumbrances; (3) environmental and hazardous substances; and (4) validity of contracts and liabilities inuring to CJR or affecting the Assets, whether contingent or otherwise.
- C. The purchase price for the Assets ("Purchase Price") shall be their fair market value, (or, for leased assets, the fair market value of Franchisee's lease) determined as of the effective date of purchase in a manner that accounts for reasonable depreciation and condition of the Assets; provided, however, that the Purchase Price shall take into account the termination of this Agreement. Further, the Purchase Price for the Assets shall not contain any factor or increment for any trademark, service mark or other commercial
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, the term 'Assets' that Carls Jr. has the option to purchase from a franchisee includes leasehold improvements, equipment, vehicles, furnishings, fixtures, signs, and inventory (specifically non-perishable products, materials, and supplies) used in the Franchised Restaurant. The definition of 'Assets' also extends to the real estate, encompassing either the fee simple ownership or the lease or sublease for the Franchised Location.
Carls Jr.'s option to purchase these assets arises upon the expiration or termination of the franchise agreement for any reason. To exercise this option, Carls Jr. must provide written notice to the franchisee within a specified timeframe: up to 60 days after the later of either the effective date of termination or expiration, or the date the franchisee ceases to operate the Franchised Restaurant. This provision ensures that Carls Jr. has a defined period to decide whether to acquire the assets of the restaurant after the franchise agreement concludes.
The FDD specifies that the purchase price for these assets will be their fair market value, or for leased assets, the fair market value of the franchisee's lease. This valuation is determined as of the effective date of purchase, accounting for reasonable depreciation and the condition of the assets. However, the purchase price will not include any additional value attributed to trademarks, service marks, or other commercial symbols associated with the restaurant's operation, nor any goodwill or 'going concern' value. This ensures that the franchisee is compensated for the tangible assets and lease rights, but not for the brand value or established business reputation.