Under what circumstances is the issuance or exercise of options not considered a transfer requiring Carls Jr.'s consent?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
- E. Notwithstanding the provisions of Sections 10.A. and B., the issuance of options or the exercise of options pursuant to a qualified stock option plan or a qualified employee stock ownership plan shall not be considered a Transfer and shall not require the prior written consent of CJR; provided no more than a total of 49% of Developer's outstanding voting securities are subject to the qualified stock option plan or qualified employee stock ownership plan.
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, the issuance or exercise of options under specific qualified plans does not constitute a transfer requiring prior written consent from Carls Jr. This exception applies to qualified stock option plans or qualified employee stock ownership plans. However, this is conditional.
Specifically, the exception is valid only if no more than a total of 49% of the Developer's outstanding voting securities are subject to these qualified plans. This means that if the options issued or exercised under these plans would result in more than 49% of the voting securities being affected, the franchisee would need to obtain prior written consent from Carls Jr. for the transfer.
This provision is important for prospective Carls Jr. franchisees because it outlines a specific scenario where they can issue or exercise stock options without needing franchisor approval, provided they stay within the specified limit. It allows some flexibility in structuring employee compensation and ownership without triggering transfer restrictions, which could otherwise require Carls Jr.'s consent and potentially delay or complicate such transactions.