Under what circumstances will the Carls Jr. incentive program be terminated following written notice to the franchisee?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
- 4. Termination of Program Incentives. This Addendum and the Program will terminate following written notice to Franchisee if:
- A. Franchisee fails to open the Franchised Restaurant on or before 120 days after the contractual opening date pursuant to the terms of the Franchisee's Development Agreement; or
- B. Franchisee or any affiliate of Franchisee receives, during the first three years of operation of the Franchised Restaurant under the Franchise Agreement, a written notice of default under any agreement between Franchisee or any affiliate of Franchisee and CJR or any affiliate of CJR and fails to cure the default within the applicable cure period, if any.
- 5. Effect of Termination. If this Addendum is terminated the royalty fee and APO for the Franchised Restaurant will immediately revert to the applicable amounts set forth in the Franchise Agreement.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 75)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, the Development Incentive Program Addendum will be terminated following written notice to the franchisee under specific circumstances. The program can be terminated if the franchisee fails to open the franchised restaurant on or before 120 days after the contractual opening date, as outlined in the Development Agreement. This means a franchisee has a limited window to open their restaurant once the contractual opening date has passed, or they risk losing the incentives.
Additionally, the Carls Jr. incentive program can be terminated if the franchisee, or any of their affiliates, receives a written notice of default under any agreement with Carls Jr. or its affiliates during the first three years of the restaurant's operation. To avoid termination, the franchisee must cure the default within the applicable cure period, if one is provided. This condition highlights the importance of adhering to all agreements with Carls Jr. and its affiliates during the initial years of operation.
If the Addendum is terminated, the royalty fee and Advertising Pool Obligation (APO) for the franchised restaurant will immediately revert to the standard amounts set forth in the Franchise Agreement. This implies that the franchisee will lose any benefits gained from the incentive program, such as reduced fees or contributions, and will be subject to the standard financial obligations. Therefore, it is crucial for franchisees to meet the opening date requirements and maintain compliance with all agreements to avoid losing the incentive benefits and reverting to the standard franchise terms.