Can Carls Jr. transfer its rights and obligations under the Franchise Agreement without the franchisee's consent?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
B. Franchisee 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 18.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.
These factors may include, but will not be limited to, the following:
- (1) The proposed transferee (and if the proposed transferee is not a natural person, all persons that have any direct or indirect interest in the transferee as CJR may require) must demonstrate to CJR's satisfaction extensive experience in high quality restaurant operations of a character and complexity similar to Carl's Jr.
Restaurants; must meet the managerial, operational, experience, quality, character and business standards for a franchisee promulgated by CJR from time to time; must possess a good character, business reputation and credit rating; must have an organization whose management culture is compatible with CJR's management culture; and must have adequate financial resources and working capital, as determined by CJR in its sole discretion, to meet Franchisee's obligations under this Agreement.
- (2) If the Transfer is a sale, the sales price shall not be so high, in CJR's reasonable judgment, as to jeopardize the ability of the transferee to develop, maintain, operate and promote the Franchised Restaurant and meet financial obligations to CJR, third party suppliers and creditors.
CJR's decision with respect to a proposed Transfer shall not create any liability on the part of CJR: (a) to the transferee, if CJR consents to the Transfer and the transferee experiences financial difficulties; or (b) to Franchisee or the proposed transferee, if CJR withholds consent to the Transfer.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
Based on the 2025 Carls Jr. Franchise Disclosure Document, the document does not explicitly state whether Carls Jr. can transfer its rights and obligations under the Franchise Agreement without the franchisee's consent. However, the FDD does outline the franchisee's responsibilities regarding transfer of the franchise.
Specifically, if a franchisee wishes to transfer their franchise, they must advise CJR (Carls Jr.) in writing, submit a franchise application for the proposed transferee, provide copies of all contracts and agreements related to the transfer, and submit any other information CJR requests. CJR then has the right of first refusal. If CJR does not exercise this right, they still have sole discretion to consent to the transfer based on numerous factors.
These factors include the transferee's experience in high-quality restaurant operations, their managerial and operational standards, character, business reputation, credit rating, compatibility with CJR's management culture, and adequate financial resources. Additionally, if the transfer involves a sale, CJR will assess whether the sales price jeopardizes the transferee's ability to operate the franchise successfully and meet their financial obligations. CJR's decision regarding the transfer does not create any liability for CJR, either to the transferee if they experience financial difficulties or to the franchisee or proposed transferee if CJR withholds consent.
Because the FDD does not explicitly address Carls Jr.'s ability to transfer its own rights and obligations, prospective franchisees should seek clarification from the franchisor regarding this matter. Understanding the conditions under which Carls Jr. can transfer its obligations is crucial for assessing the stability and long-term prospects of the franchise agreement.