Under what circumstances does Carls Jr. have the option to purchase assets from the franchisee?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
necessary to clearly distinguish to the public the Franchised Location from its former appearance and also make those specific additional changes as CJR may request for that purpose. If Franchisee fails to promptly make these alterations and modifications, CJR shall have the right (at Franchisee's expense, to be paid upon Franchisee's receipt of an invoice from CJR) to do so without being guilty of trespass or other tort.
- G. Franchisee shall furnish CJR, within 30 days after the effective date of termination or expiration, evidence (certified to be true, complete, accurate and correct by an authorized officer of Franchisee) satisfactory to CJR of Franchisee's compliance with Sections 22.A. through 22.F.
- H. Franchisee shall not, except with respect to a restaurant franchised by CJR or its affiliates which is then open and operating pursuant to an effective franchise agreement or a restaurant franchised by CJR or its affiliates which is under construction pursuant to a fully-signed franchise agreement: (1) operate or do business under any name or in any manner that might tend to give the public the impression that Franchisee is connected in any way with CJR or its affiliates or has any right to use the System or the Proprietary Marks; (2) make, use or avail itself of any of the materials or information furnished or disclosed by CJR or its affiliates under this Agreement or disclose or reveal any such materials or information or any portion thereof to anyone else; or (3) assist anyone not licensed by CJR or its affiliates to construct or equip a foodservice outlet substantially similar to a Carl's Jr. Restaurant.
23. OPTION TO PURCHASE
- A. Upon the expiration or termination of this Agreement for any reason, CJR will have the option to purchase from Franchisee some or all of the assets used in the Franchised Restaurant ("Assets"). CJR may exercise its option by giving written notice to Franchisee at any time following expiration or termination up until 60 days after the later of: (1) the effective date of termination or expiration; or (2) the date Franchisee ceases to operate the Franchised Restaurant. As used in this Section 23, "Assets" shall mean and include, without limitation, leasehold improvements, equipment, vehicles, furnishings, fixtures, signs and inventory (non-perishable products, materials and supplies) used in the Franchised Restaurant, and the real estate fee simple or the lease or sublease for the Franchised Location. CJR shall be entitled to the entry of interlocutory and permanent orders of specific performance by a court of competent jurisdiction if Franchisee fails or refuses to timely meet its obligations under this Section 23.
- B. CJR shall have the unrestricted right to assign this option to purchase the Assets.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, Carls Jr. has the option to purchase some or all of the assets used in the franchised restaurant from the franchisee. This option becomes available upon the expiration or termination of the Franchise Agreement for any reason. Carls Jr. can exercise this option by providing written notice to the franchisee anytime following the expiration or termination of the agreement, up to 60 days after the later of the effective date of termination or expiration, or the date the franchisee ceases to operate the restaurant.
The assets that Carls Jr. may purchase include leasehold improvements, equipment, vehicles, furnishings, fixtures, signs, and inventory (specifically non-perishable products, materials, and supplies). The agreement specifies that 'assets' also include the real estate fee simple or the lease or sublease for the franchised location. Carls Jr. also has the right to seek specific performance from a court if the franchisee fails to meet their obligations regarding the asset purchase.
The purchase price for these assets will be their fair market value, or for leased assets, the fair market value of the franchisee's lease. This valuation will be determined as of the effective date of purchase, accounting for reasonable depreciation and the condition of the assets. However, the purchase price will not include any additional value for trademarks, service marks, or other commercial symbols associated with the Carls Jr. brand, nor any goodwill or 'going concern' value for the restaurant.
Carls Jr. may exclude any assets that do not meet the current standards for a Carls Jr. Restaurant or for which the franchisee cannot provide a satisfactory bill of sale. This ensures that Carls Jr. only purchases assets that align with their brand standards and have clear ownership. Carls Jr. also has the unrestricted right to assign this option to purchase the assets to another party.