Under what conditions can Carls Jr. require a franchisee to submit audited financial statements, and who is responsible for the expense?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
At CJR's request, Franchisee shall, at its expense, provide to CJR either a reviewed or audited profit and loss statement and balance sheet for the Franchised Restaurant within 60 days after the end of each fiscal year to be signed by Franchisee or by Franchisee's treasurer or chief financial officer attesting that the financial statements present fairly the financial position of Franchisee and the results of operations of the Franchised Restaurant during the period covered. CJR shall have the right, in its reasonable discretion, to require that Franchisee, at Franchisee's expense, submit audited financial statements prepared by a certified public accounting firm acceptable to CJR for any fiscal year or any period or periods of a fiscal year.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to Carls Jr.'s 2025 Franchise Disclosure Document, franchisees are generally required to provide either a reviewed or audited profit and loss statement and balance sheet for their franchised restaurant to Carls Jr. within 60 days after the end of each fiscal year. These financial statements must be signed by the franchisee, treasurer, or chief financial officer, attesting that they accurately reflect the franchisee's financial position and operating results. The franchisee is responsible for covering the expense of these reports.
However, Carls Jr. retains the right to request audited financial statements specifically. This can occur for any fiscal year or any period within a fiscal year. This request is subject to Carls Jr.'s reasonable discretion, and the audit must be performed by a certified public accounting firm that is acceptable to Carls Jr. Again, the franchisee bears the expense of this audit.
In summary, while Carls Jr. typically requires annual reviewed or audited financial statements, they can, at their discretion, demand a fully audited statement for any period, provided it's prepared by an approved accounting firm, with the franchisee always responsible for the associated costs.