Under what circumstances will the agreement automatically terminate for a Carls Jr. franchised location, according to section 6.4?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
- of 3.1 (License), 3.2 (Proprietary Rights), 3.3 (Trademark License) and 5 (Confidentiality; Security), or if the aggregate effect of nonmaterial breaches by the same party satisfies this standard for materiality.
- 6.4. Termination of Franchise Agreement/Elimination of Location. This Agreement shall automatically terminate as to a franchised location if and when (i) the franchise agreement between Customer and Operator is terminated, in which case this Agreement shall terminate as to all Customer franchised locations of Operator, or (ii) Operator no longer owns and operates the franchised location, in which case, this Agreement shall only terminate as to such franchised location.
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, section 6.4 outlines the conditions under which the franchise agreement will automatically terminate. The agreement terminates automatically for a franchised location if the franchise agreement between the Customer and Operator is terminated. In this case, the agreement terminates as to all Customer franchised locations of the Operator. The agreement will also terminate if the Operator no longer owns and operates the franchised location. In this case, the agreement will only terminate as to such franchised location.
This means that if a franchisee's agreement with Carls Jr. is terminated for any reason, their rights to operate that location immediately cease. Similarly, if the franchisee sells or otherwise relinquishes ownership of a specific franchised location, their franchise agreement for that location is automatically terminated. This clause protects Carls Jr.'s brand integrity and ensures consistent operation standards across all locations.
Prospective franchisees should carefully consider these termination conditions, as they highlight the importance of maintaining a strong relationship with Carls Jr. and adhering to the terms of the franchise agreement. Understanding these conditions is crucial for long-term business planning and risk management. Franchisees should seek legal counsel to fully understand their rights and obligations under the franchise agreement.