Under what circumstances are the ownership interest disclosure requirements for a Carls Jr. franchisee limited to the Continuity Group?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee is a business entity, Franchisee must furnish CJR with a list of all holders of a direct or indirect ownership interest in Franchisee and their respective percentage interests. As of the date of this Agreement, all interests in Franchisee are owned as set forth in attached Appendix D. Franchisee shall comply with Section 18 prior to any change in ownership interests and shall update Appendix D as changes occur in order to ensure the information contained in Appendix D is true, accurate and complete at all times.
The requirements of this Section 16.C. shall apply only to Franchisee's Continuity Group (defined in Section 16.E.) if, as of the date of the first franchise-related agreement between Franchisee and CJR or one of its affiliates, Franchisee was a publicly-held entity (i.e., an entity that has a class of securities traded on a recognized securities exchange or quoted on the inter-dealer quotation sheets known as the "pink sheets"). If Franchisee becomes a publicly-held entity after that date, it shall thereafter be required to update Appendix D only with respect to changes in ownership interests of members of the Continuity Group.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, if a franchisee is a business entity, they must provide Carls Jr. with a list of all direct or indirect ownership interest holders and their respective percentage interests. This information is initially provided in Appendix D of the franchise agreement and must be updated as changes occur to ensure accuracy.
However, the requirement to disclose all ownership interests is limited to the franchisee's Continuity Group under specific conditions. If, at the time of the first franchise-related agreement between the franchisee and Carls Jr., the franchisee was a publicly-held entity (i.e., an entity with securities traded on a recognized exchange or quoted on the "pink sheets"), the disclosure requirements are limited.
If the franchisee becomes a publicly-held entity after the initial franchise agreement, they are only required to update Appendix D with changes in the ownership interests of the members within the Continuity Group. This means that changes in ownership outside of the Continuity Group do not need to be reported to Carls Jr., simplifying the administrative burden for publicly-held franchisees.