Can Carls Jr. terminate the Development Agreement if a transfer occurs without their consent?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
In addition to the grounds for termination that may be stated elsewhere in this Agreement, CJR may terminate this Agreement, and the rights granted by this Agreement, upon written notice to Developer without an opportunity to cure upon the occurrence of any of the following events:
- (8) Any Transfer that requires CJR's prior written consent occurs without Developer having obtained that prior written consent.
Except as otherwise provided in this Agreement, any purported Transfer, by operation of law or otherwise, not having the prior written consent of CJR shall be null and void and shall constitute a material breach of this Agreement, for which CJR may terminate this Agreement without providing Developer an opportunity to cure the breach.
- B. Developer shall advise CJR in writing of any proposed Transfer, submit (or cause the proposed transferee to submit) a franchise application for the proposed transferee, submit a copy of all contracts and all other agreements or proposals and submit all other information requested by CJR relating to the proposed Transfer.
If CJR does not exercise its right of first refusal pursuant to Section 10.J., the decision as to whether or not to consent to a proposed Transfer shall be made by CJR in its sole discretion and shall include numerous factors deemed relevant by CJR.
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, Carls Jr. can terminate the Development Agreement if a transfer occurs without their prior written consent. Specifically, Item 23 states that if any transfer requiring Carls Jr.'s prior written consent occurs without obtaining that consent, it is grounds for termination of the agreement.
Furthermore, the FDD clarifies that any purported transfer without prior written consent from Carls Jr. is considered a material breach of the agreement. In such cases, Carls Jr. has the right to terminate the agreement without providing the developer an opportunity to cure the breach. This underscores the importance of adhering to the transfer protocols outlined in the Development Agreement.
To initiate a transfer, the developer must inform Carls Jr. in writing about the proposed transfer and ensure that the potential transferee submits a franchise application. Additionally, the developer must provide copies of all relevant contracts, agreements, proposals, and any other information requested by Carls Jr. related to the proposed transfer. Carls Jr. retains sole discretion in deciding whether to consent to the transfer, considering factors such as the transferee's experience, financial resources, and compatibility with Carls Jr.'s management culture. This rigorous process highlights the brand's commitment to maintaining consistent standards and protecting its interests.