How must the Purchase Price be paid to the franchisee when Carls Jr. exercises its option to purchase the assets?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
From the date of CJR's Purchase Notice until Closing:
(1) Franchisee shall operate the Franchised Restaurant and maintain the Assets in the usual and ordinary course of business and maintain in full force all insurance policies required under this Agreement; and
(2) CJR shall have the right to appoint a manager, at CJR's expense, to control the day-to-day operations of the Franchised Restaurant and Franchisee shall cooperate, and instruct its employees to cooperate, with the manager appointed by CJR.
Alternatively, CJR may require Franchisee to close the Franchised Restaurant during such time period without removing any Assets from the Franchised Restaurant.
- G. For a period of 60 days after the date of CJR's Purchase Notice ("Due Diligence Period"), CJR shall have the right to conduct such investigations as it deems necessary and appropriate to determine: (1) the ownership, condition and title of the Assets; (2) liens and encumbrances on the Assets; (3) environmental and hazardous substances at or upon the Franchised Location; and (4) the validity of contracts and liabilities inuring to CJR or affecting the Assets, whether contingent or otherwise.
Franchisee will afford CJR and its representatives access to the Franchised Restaurant and the Franchised Location at all reasonable times for the purpose of conducting inspections of the Assets; provided that such access does not unreasonably interfere with Franchisee's operation of the Franchised Restaurant.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to Carls Jr.'s 2025 Franchise Disclosure Document, when Carls Jr. exercises its option to purchase a franchisee's assets, the purchase price must be paid in cash or cash equivalents. The closing of the purchase, where this payment occurs, must take place no later than 60 days after the date of CJR's Purchase Notice.
From the date of Carls Jr.'s Purchase Notice until the closing, the franchisee is expected to continue operating the franchised restaurant and maintain the assets in the usual and ordinary course of business, ensuring all required insurance policies remain in full force. However, Carls Jr. retains the right to appoint a manager, at its own expense, to oversee the day-to-day operations of the restaurant during this period, and the franchisee is obligated to cooperate with this manager. Alternatively, Carls Jr. may require the franchisee to close the franchised restaurant during this period, without removing any assets.
Carls Jr. also has a 60-day 'Due Diligence Period' after the Purchase Notice to investigate the assets' ownership, condition, title, any liens or encumbrances, environmental or hazardous substances at the location, and the validity of related contracts and liabilities. During this time, the franchisee must allow Carls Jr. and its representatives access to the restaurant and location for inspections, provided it does not unreasonably interfere with the restaurant's operation.