What representations and warranties is Carls Jr. entitled to when purchasing assets from a Carls Jr. franchisee?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
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)
Based on the 2025 Carls Jr. Franchise Disclosure Document, when Carls Jr. exercises its option to purchase assets from a franchisee, the assets purchased will not include any rights to the restaurant's symbol, goodwill, or "going concern" value. Carls Jr. can exclude any equipment, vehicles, furnishings, fixtures, signs, and inventory that don't meet the current standards for a Carls Jr. restaurant or if the franchisee cannot provide a satisfactory Bill of Sale.
If Carls Jr. and the franchisee can't agree on the fair market value of the assets within 30 days of Carls Jr.'s notice to purchase, the fair market value will be determined by two certified appraisers, one chosen by each party, within 60 days of the notice. If the higher appraisal exceeds the lower one by more than 10%, a third appraiser will be selected by the first two, and the average of all appraisals will determine the purchase price.
The appraisers will have full access to the restaurant, location, and franchisee's records to conduct the appraisal, valuing leasehold improvements, equipment, furnishings, fixtures, signs, and inventory according to specified standards. The costs for the appraisers will be split equally between Carls Jr. and the franchisee. Carls Jr. can then exercise its option to purchase the assets within 10 days after the purchase price is determined by notifying the franchisee in writing. The purchase will be paid in cash or equivalents at closing, which must occur within 60 days of Carls Jr.'s purchase notice.