What representations and warranties is Carls Jr. entitled to when purchasing assets?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
Based on the 2025 Carls Jr. Franchise Disclosure Document, when Carls Jr. exercises its option to purchase assets from a franchisee upon termination or expiration of the franchise agreement, there are certain conditions regarding the assets. Carls Jr. is not obligated to purchase any goodwill or "going concern" value associated with the Franchised Restaurant. Additionally, Carls Jr. can exclude any equipment, vehicles, furnishings, fixtures, signs, and inventory that do not meet the current standards for a Carls Jr. Restaurant.
Furthermore, Carls Jr. can refuse to purchase assets for which the franchisee cannot provide a Bill of Sale in a form that is satisfactory to Carls Jr. This protects Carls Jr. by ensuring they only acquire assets that meet their brand standards and for which clear ownership can be established.
In practical terms, this means a franchisee needs to maintain their restaurant's assets to Carls Jr.'s standards throughout the term of the agreement. If a franchisee neglects upkeep or uses unapproved equipment, Carls Jr. is not obligated to buy those assets upon termination. The franchisee also needs to maintain proper documentation to prove ownership of the assets, or Carls Jr. can refuse to purchase them.