What minimum equity ownership interest must the Development Principal have in the Developer for a Carls Jr. franchise, and are there any exceptions to this requirement?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
Developer shall designate and retain an individual to serve as the Development Principal. (If Developer is owned by one individual, that individual may serve as the Development Principal if the individual meets CJR's requirements for a Development Principal.) The Development Principal as of the date of this Agreement is identified in Appendix C. The Development Principal shall meet all of the following qualifications:
- (1) The Development Principal shall have at least a 10% equity ownership interest in Developer or, if Developer is a limited partnership, in Developer's general partner, unless this requirement is modified by CJR in its sole discretion. This Section 8.F.(1) shall not apply if Developer was a publiclyheld entity or a wholly-owned subsidiary of a publicly-held entity as of the date of the first franchise-related agreement between Developer and CJR.
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, the Development Principal must maintain at least a 10% equity ownership interest in the Developer. If the Developer is a limited partnership, the Development Principal must have at least a 10% equity ownership in the Developer's general partner.
However, there is an exception to this requirement. Carls Jr. may modify this equity ownership requirement at its sole discretion. Additionally, this 10% equity ownership requirement does not apply if the Developer was a publicly-held entity or a wholly-owned subsidiary of a publicly-held entity as of the date of the first franchise-related agreement between the Developer and Carls Jr.
This stipulation ensures that the Development Principal has a significant stake in the success of the Carls Jr. franchise development. The exception for publicly-held entities acknowledges that ownership structures can be different in such organizations. Prospective franchisees should confirm with Carls Jr. whether any modifications to the 10% equity ownership requirement are applicable in their specific case.