Under what conditions can Carls Jr. withhold approval for a franchisee's financing of the Franchised Restaurant through a public or private offering?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
Without the prior written approval of CJR, which shall not be unreasonably withheld, the construction, renovation and/or operation of the Franchised Restaurant shall not be financed by a public or private offering of any right, title or interest in the Franchised Restaurant, the property upon which it is built or the receipts from its operation.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to Carls Jr.'s 2025 Franchise Disclosure Document, a franchisee needs prior written approval from CJR to finance the construction, renovation, and/or operation of their franchised restaurant through a public or private offering. Carls Jr. agrees to not unreasonably withhold this approval.
This stipulation means that if a franchisee seeks to raise capital by selling stocks or other securities related to the restaurant, they must first get the green light from Carls Jr.. This is to ensure that the financing methods align with the brand's interests and standards.
The clause protects Carls Jr. from potential risks associated with how a franchisee might finance their business, maintaining control over the brand's image and financial stability. However, it also implies that Carls Jr. should have legitimate reasons if they decide to deny approval, as the approval cannot be "unreasonably withheld."