Under what condition can securities or partnership interests in a Carls Jr. developer be sold?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
- I. Securities or partnership interests in Developer may be sold, by private or public offering, only with CJR's prior written consent (whether or not CJR's consent is required under any other provision of this Section), which consent shall not be unreasonably withheld.
In addition to the requirements of Section 10.B., prior to the time that any public offering or private placement of securities or partnership interests in Developer is made available to potential investors, Developer, at its expense, shall deliver to CJR a copy of the offering documents.
Developer, at its expense, also shall deliver to CJR an opinion of Developer's legal counsel and an opinion of one other legal counsel selected by CJR (both of which shall be addressed to CJR and in a form acceptable to CJR) that the offering documents properly use the Proprietary Marks and accurately describe Developer's relationship with CJR and/or its affiliates.
The indemnification provisions of Section 16 shall also include any losses or expenses incurred by CJR and its affiliates in connection with any statements made by or on behalf of Developer in any public offering or private placement of Developer's securities.
Source: Item 23 — RECEIPTS (FDD pages 76–364)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, a developer can sell securities or partnership interests in their business only with Carls Jr.'s prior written consent. This requirement applies regardless of whether consent is required under any other provision in the agreement. Carls Jr. states that this consent will not be unreasonably withheld.
Before making any public offering or private placement of securities or partnership interests available to potential investors, the developer must provide Carls Jr. with a copy of the offering documents at their own expense. Additionally, the developer is responsible for delivering legal opinions from their counsel and another counsel selected by Carls Jr., both addressed to Carls Jr. and in a form acceptable to them. These opinions must confirm that the offering documents properly use Carls Jr.'s proprietary marks and accurately describe the developer's relationship with Carls Jr. and its affiliates.
The FDD also stipulates that the indemnification provisions outlined in Section 16 will cover any losses or expenses incurred by Carls Jr. and its affiliates related to statements made by or on behalf of the developer in any public offering or private placement of the developer's securities. This means the developer is responsible for protecting Carls Jr. from any legal or financial repercussions arising from inaccuracies or misrepresentations in their offering documents.