Under what conditions can securities or partnership interests in a Carls Jr. franchise be sold?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
ords that CJR may request. When any of these governing documents are modified or changed, Franchisee promptly shall provide copies to CJR.
C. Ownership Interests
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.
D. Restrictive Legend
If Franchisee is a corporation, Franchisee shall maintain stop-transfer instructions against the transfer on its records of any voting securities, and each stock certificate of the corporation shall have conspicuously endorsed upon its face the following statement: "Any assignment or transfer of this stock is subject to the restrictions imposed on assignment by the Carl's Jr. Restaurant Franchise Agreement(s) to which the corporation is a party." If Franchisee is a publicly-held corporation these requirements shall apply only to the stock owned by Franchisee's Continuity Group. If Franchisee is a limited liability company, each membership or management certificate or other evidence of interest in Franchisee shall have conspicuously endorsed upon its face the following statement: "Any assignment or transfer of an interest in this limited liability company is subject to the restrictions imposed on assignment by the Carl's Jr. Restaurant Franchise Agreement(s) to which the limited liability company is a party." If Franchisee is a partnership, its written partnership agreement shall provide that ownership of an interest in the partnership is held subject to, and that further assignment or transfer is subject to, all restrictions imposed on assignment by this Agreement. If Franchisee is any other type of business entity, its organizational and governing documents shall provide that an ownership interest in the business entity is held subject to, and further assignment or transfer is subject to, all restrictions imposed on assignment by this Agreement.
**E.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, the sale of securities or partnership interests in a Carls Jr. franchise is subject to certain restrictions. If the franchisee is a corporation, they must maintain stop-transfer instructions against the transfer of any voting securities on its records. Additionally, each stock certificate must have a statement indicating that any assignment or transfer of the stock is subject to the restrictions imposed by the Carl's Jr. Restaurant Franchise Agreement. These requirements apply only to the stock owned by the franchisee's Continuity Group if the franchisee is a publicly-held corporation.
For limited liability companies, each membership or management certificate must also have a statement indicating that any assignment or transfer of interest is subject to the restrictions in the Franchise Agreement. If the franchisee is a partnership, the written partnership agreement must state that ownership of an interest in the partnership is subject to all restrictions imposed on assignment by the Agreement. Similar stipulations apply to any other type of business entity, ensuring that their organizational documents reflect these restrictions.
Carls Jr. also stipulates that in the event of death or permanent incapacity of a person with ownership interest in the franchise, they will not unreasonably withhold consent to a transfer designated by the legal representative, provided certain requirements are met. These requirements include meeting the conditions outlined in Section 18.B and 18.C of the agreement, applying for the transfer in writing within 2 months of the event, and effecting the transfer within 6 months. In cases of permanent incapacity, a physician designated by Carls Jr. must certify that the franchisee is unable to operate the restaurant for at least 6 months. Furthermore, franchisees cannot grant any security interest in their business without prior written consent from Carls Jr., which will not be unreasonably withheld, and may be conditioned on Carls Jr.'s option to purchase the rights of the secured party in case of default.