Does Carls Jr. provide material benefits to franchisees based on the franchisee's purchase of particular products or services or the use of particular suppliers?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
We negotiate system-wide contracts with a number of suppliers under which Carl's Jr. Restaurants may purchase products at a negotiated price and terms. Franchisees are entitled to purchase products at the price and terms negotiated by us; however, we reserve the right to limit the number of suppliers who deliver the products at those prices and terms. With respect to equipment, smallwares and supplies, to obtain the negotiated price and to be eligible for certain revenue sharing incentives, you must purchase the equipment, smallwares and supplies from our third-party vendor Wasserstrom Holdings, Inc. and its subsidiaries. There currently are no purchasing or distribution cooperatives. We do not provide material benefits to a franchisee based on the franchisee's purchase of particular products or services or the use of particular suppliers.
Approximately 90% of your purchases or leases of fixtures, furnishings, equipment, décor, signs, food items, ingredients, supplies and other products in connection with the establishment of the Franchised Restaurant must be purchased in accordance with our specifications or from approved suppliers. We estimate that these items represent approximately 65% of your controllable purchases, excluding labor and general administrative costs in connection with the ongoing operation of the Franchised Restaurant. We do not provide material benefits (e.g., renewal or additional franchises) to you based on use of designated or approved suppliers.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 37–41)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, Carls Jr. does not provide material benefits to franchisees based on their purchase of particular products or services or the use of particular suppliers. However, to obtain negotiated pricing and be eligible for certain revenue sharing incentives, franchisees must purchase equipment, smallwares, and supplies from Carls Jr.'s third-party vendor, Wasserstrom Holdings, Inc. and its subsidiaries. Franchisees are generally required to purchase approximately 90% of their fixtures, furnishings, equipment, décor, signs, food items, ingredients, supplies, and other products from approved suppliers, which represents about 65% of their controllable purchases, excluding labor and administrative costs.
Carls Jr. negotiates system-wide contracts with various suppliers, allowing franchisees to purchase products at the negotiated prices and terms, although Carls Jr. reserves the right to limit the number of suppliers. Franchisees are also required to participate in any online ordering/delivery and loyalty programs that Carls Jr. establishes with approved vendors, such as OLO for online ordering, Punchh for the loyalty program, and designated service providers like Uber Eats, Door Dash, and GrubHub for delivery services.
During the fiscal year ended January 27, 2025, Carls Jr. received rebates from suppliers such as CDM ($50,000), KDM ($31,670.74), Dr. Pepper ($114,623.12), and Coca-Cola ($1,793,188). These funds were primarily used to offset the costs of point-of-purchase materials and other advertising expenses related to promoting Carls Jr. products. Additionally, Carls Jr. and its affiliates' revenue from sales and leases to franchisees totaled approximately $86.2 million, representing about 12.9% of the total revenue of the Securitization Entities, which was approximately $671.4 million. Carls Jr. also provides supply chain, quality assurance, distribution, and logistics services, recovering costs through per-case distribution fees and other logistics-related programs.