Under what conditions will the Carls Jr. development incentive program terminate following written notice to the Franchisee?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
- 3. 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 Franchise 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.
- 4. Effect of Termination. If this Addendum is terminated during the first three years of the Franchised Restaurant's operation under the Franchise Agreement, 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 terminate following written notice to the franchisee under specific conditions. The program can be terminated if the franchisee fails to open the franchised restaurant within 120 days after the contractual opening date, as outlined in the Development Agreement or Franchise Agreement.
Additionally, the Carls Jr. development incentive program can be terminated if the franchisee, or any of their affiliates, receives a written notice of default during the first three years of operating the franchised restaurant under the Franchise Agreement. This default must be related to any agreement between the franchisee (or their affiliate) and CJR (or its affiliates). To avoid termination, the franchisee must cure the default within the applicable cure period, if one is provided.
If the Development Incentive Program Addendum is terminated during the first three years of the restaurant's operation, the royalty fee and Advertising Promotion Obligation (APO) for the franchised restaurant will immediately revert to the amounts specified in the original Franchise Agreement. This implies that the franchisee will lose any benefits or reductions to these fees that were provided by the incentive program.