What is the required action for a Carls Jr. franchisee regarding assessments imposed on the franchisor?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Fee (1) | Amount | Due Date | Remarks |
|---|---|---|---|
| Costs and Attorneys' Fees | CJR's costs and expenses | As incurred | If we prevail in litigation regarding enforcement of the terms of any agreement with you, you must pay our attorneys' fees and costs. |
| Liquidated Damages | As calculated (see Remarks) | As incurred | If the Franchise Agreement is terminated following your default, since it would be difficult, if not impossible, to determine the amount of damages that we will suffer as a result of your breach, unless waived by us in our sole discretion, you must immediately pay us, as damages and not as a penalty, the amount of the royalty fee that you would have paid during the period ("Damages Period") from the effective date of termination to the earlier of: (a) the 3-year anniversary of the effective date of termination; or (b) the date on which the initial term of the Franchise Agreement was scheduled to expire. The amount of such royalty fee during the Damages Period will be calculated by multiplying the average weekly royalty fee that you owed for the 52-week period prior to the effective date of termination by the number of weeks in the Damages Period. |
| Reimbursement of Insurance Costs | Cost of obtaining coverage | Immediately upon receipt of invoice | If you fail to procure or maintain the required insurance, we may procure the insurance and charge its cost along with our out-of-pocket expenses to you. We collect the cost of the insurance coverage for the insurance company with which we place the coverage. |
Source: Item 6 — Other Fees (FDD pages 28–35)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, a franchisee is obligated to cover Carls Jr.'s costs and expenses if Carls Jr. prevails in litigation regarding the enforcement of any agreement's terms. This means that if Carls Jr. has to take legal action to ensure a franchisee complies with their agreement, the franchisee will be responsible for Carls Jr.'s legal fees and associated costs.
Additionally, if a franchisee defaults and the Franchise Agreement is terminated, the franchisee must pay liquidated damages to Carls Jr., unless Carls Jr. waives this requirement. These damages are calculated based on the royalty fees the franchisee would have paid during a specific period, either three years from the termination date or until the original term of the agreement expires, whichever comes first. The amount is determined by multiplying the average weekly royalty fee from the 52 weeks before termination by the number of weeks in the damages period.
Carls Jr. also requires franchisees to reimburse insurance costs if the franchisee fails to maintain the required insurance coverage. In such cases, Carls Jr. may obtain the necessary insurance and charge the franchisee for the cost of coverage, along with any out-of-pocket expenses incurred. The franchisee is responsible for paying these insurance costs immediately upon receiving an invoice from Carls Jr.