What is the maximum liability of CKR to a Carls Jr. franchisee for any reason and upon any cause of action?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
CKR HAVE NO LIABILITY TO FRANCHISEE FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL, INCIDENTAL OR PUNITIVE DAMAGES WITH RESPECT TO ITS OBLIGATIONS UNDER THIS AGREEMENT OR OTHERWISE, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF THOSE DAMAGES. CKR WILL NOT BE RESPONSIBLE FOR ANY LOSS OF BUSINESS, LOSS OF PROFIT OR OTHER FINANCIAL LOSS BY FRANCHISEE DURING THE PERIOD IN WHICH THE LICENSED PRODUCTS ARE INOPERATIVE, NOR WILL CKR BE RESPONSIBLE FOR ANY LOSS OR INACCURACY OF DATA CAUSED BY THE LICENSED PRODUCTS. IN ANY EVENT, THE LIABILITY OF CKR TO FRANCHISEE FOR ANY REASON AND UPON ANY CAUSE OF ACTION SHALL BE LIMITED TO THE AMOUNT PAID TO CKR BY FRANCHISEE UNDER THIS AGREEMENT DURING THE TRAILING 12 MONTH PERIOD. THIS LIMITATION APPLIES TO ALL CAUSES OF ACTION IN THE AGGREGATE, INCLUDING, WITHOUT LIMITATION, BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATIONS AND OTHER TORTS. THE FEES IN THIS AGREEMENT REFLECT, AND ARE SET IN RELIANCE UPON, THIS ALLOCATION OF RISK AND THE EXCLUSION OF CONSEQUENTIAL DAMAGES SET FORTH IN THIS AGREEMENT.
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, CKR's liability to a franchisee for any reason and upon any cause of action is limited to the amount the franchisee paid to CKR under the agreement during the 12-month period preceding the cause of action. This limitation applies to all causes of action in the aggregate, including breach of contract, breach of warranty, negligence, strict liability, misrepresentations, and other torts.
This limitation of liability is a significant factor for prospective Carls Jr. franchisees to consider. It means that regardless of the damages a franchisee might suffer due to CKR's actions or omissions, the franchisee's potential recovery is capped by the fees paid to CKR in the previous year. This could be substantially less than the actual damages incurred, especially in cases of significant business disruption or losses.
The FDD states that the fees in the agreement are set in reliance upon this allocation of risk and the exclusion of consequential damages. This suggests that the franchise fees may be lower than they would be if CKR assumed greater liability. However, franchisees should carefully weigh the potential benefits of lower fees against the risk of limited recovery in case of a dispute. Franchisees should consult with a legal professional to fully understand the implications of this limitation of liability and how it might affect their rights and remedies.
It is also important to note that CKR expressly disclaims all warranties, express or implied, including warranties of merchantability and fitness for a particular purpose. CKR does not warrant that the licensed products will meet franchisee's requirements or that the operation of the licensed products will be uninterrupted or error-free, or that errors in the licensed products will be corrected. The franchisee accepts the licensed products in their "AS IS" condition.