Can Carls Jr. terminate the franchise agreement if the franchisee defaults on any agreement with Carls Jr. or its affiliates?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section In Development Agreement | Summary |
|---|---|---|
| f. Termination by us with cause | Section 13 | We may terminate upon default, which includes, but is not limited to, remaining in default beyond any applicable cure period under any agreement with us or our affiliates, including any Franchise Agreement. |
| Provision | Franchise | Summary | |
|---|---|---|---|
| Agreement | |||
| f. | Termination by us with cause | Section 21 | We may terminate upon default, which includes, but is not limited to, remaining in default beyond any applicable cure period under any agreement with us or our affiliates, including any Development Agreement. |
| h. "Cause" defined – non curable defaults | Sections 21.A., 21.B.(3) & 21.C. | Non-curable defaults include: closure of Franchised Restaurant for more than 5 days; insolvency; bankruptcy; execution levied on your business or property; foreclosure; material breach of covenants; transfer without our prior written consent; material misrepresentation; falsification of reports; failure to open Franchised Restaurant within 60 days after opening is authorized; imminent danger to public health or safety; loss of possession of Franchised Location; felony conviction; breach of representation or warranty; default beyond cure period under other agreements with us or our affiliates; default after receipt of 2 or more notices of default within previous 12 months; and receipt of second consecutive failing score on an inspection. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 61–66)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, Carls Jr. can terminate the franchise agreement if a franchisee defaults on any agreement with them or their affiliates. Specifically, Carls Jr. may terminate the franchise agreement if the franchisee remains in default beyond any applicable cure period under any agreement with Carls Jr. or its affiliates, including any Development Agreement.
This means that if a franchisee fails to meet their obligations under any agreement with Carls Jr. or its affiliates, such as failing to pay royalties or adhering to operational standards, Carls Jr. has the right to terminate the franchise agreement, provided the franchisee does not correct the default within the given cure period. The cure period allows the franchisee a specific timeframe to resolve the default before Carls Jr. proceeds with termination.
Additionally, the FDD outlines certain non-curable defaults that can lead to immediate termination. These include, but are not limited to, closure of the Franchised Restaurant for more than 5 days, insolvency, bankruptcy, or a material breach of covenants. Franchisees should be aware of these potential pitfalls and ensure they maintain compliance with all agreements to avoid the risk of termination.
Prospective franchisees should carefully review the franchise agreement and related documents to fully understand their obligations and the potential consequences of default. Understanding the terms and conditions, including cure periods and non-curable defaults, is crucial for maintaining a successful and compliant franchise operation with Carls Jr.