How is the purchase price determined for the assets that Carls Jr. purchases from the franchisee?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
ers 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
symbol used in connection with the operation of the Franchised Restaurant nor any goodwill or "going concern" value for the Franchised Restaurant. CJR may exclude from the Assets purchased in accordance with this Section any equipment, vehicles, furnishings, fixtures, signs, and inventory that are not approved as meeting then-current standards for a Carl's Jr. Restaurant or for which Franchisee cannot deliver a Bill of Sale in a form satisfactory to CJR.
- D. If CJR and Franchisee are unable to agree on the fair market value of the Assets within 30 days after Franchisee's receipt of CJR's notice of its intent to exercise its option to purchase the Assets, the fair market value shall be determined by two professionally certified appraisers, Franchisee selecting one and CJR selecting one within 60 days after Franchisee's receipt of CJR's notice of intent to exercise its purchase option. If the higher appraisal is more than 10% greater than the other appraisal, the two appraisers shall select a third professionally certified appraiser who also shall appraise the fair market value of the Assets. The average value set by the appraisers (whether two or three appraisers as the case may be) shall be conclusive and shall be the Purchase Price.
- E. The appraisers shall be given full access to the Franchised Restaurant, the Franchised Location and Franchisee's books and records during customary business hours to conduct the appraisal and shall value the leasehold improvements, equipment, furnishings, fixtures, signs and inventory in accordance with the standards of this Section 23. The appraisers' fees and costs shall be borne equally by CJR and Franchisee.
- F. Within 10 days after the Purchase Price has been determined, CJR may exercise its option to purchase the Assets by so notifying Franchisee in writing ("CJR's Purchase Notice"). The Purchase Price shall be paid in cash or cash equivalents at the closing of the purchase ("Closing"), which shall take place no later than 60 days after the date of CJR's Purchase Notice.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to Carls Jr.'s 2025 Franchise Disclosure Document, the purchase price for assets that Carls Jr. may purchase from a franchisee is determined by fair market value. This valuation accounts for reasonable depreciation and the condition of the assets as of the purchase date, but it does not include any value associated with Carls Jr.'s trademarks or goodwill. The assets in question include leasehold improvements, equipment, vehicles, furnishings, fixtures, signs, and inventory.
If Carls Jr. and the franchisee cannot agree on the fair market value within 30 days of Carls Jr.'s notice of intent to purchase, the fair market value will be determined by two professionally certified appraisers. The franchisee and Carls Jr. each select one appraiser within 60 days of the notice. If the higher appraisal exceeds the lower one by more than 10%, a third appraiser is selected by the first two to provide another valuation. The average of the appraisals (whether from two or three appraisers) will be the conclusive purchase price.
Carls Jr. and the franchisee will equally bear the costs of the appraisers. The appraisers are granted full access to the restaurant, location, and the franchisee's financial records to conduct their appraisal, valuing the leasehold improvements, equipment, furnishings, fixtures, signs, and inventory according to specified standards. Within 10 days after the purchase price is determined, Carls Jr. can exercise its option to purchase by notifying the franchisee in writing, with the purchase price paid in cash or equivalents no later than 60 days after Carls Jr.'s purchase notice.