Under the Carls Jr. Development Agreement, what constitutes a default under other agreements that could lead to termination, and what cure period applies?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
(12) Developer, the Development Principal, any member of the Continuity Group, any 10% Owner or any Affiliated Entity remains in default beyond the applicable cure period: (a) under any other agreement with CJR or its affiliates; (b) under any real estate lease, equipment lease, or financing instrument relating to a Franchised Restaurant; or (c) with any vendor or supplier to a Franchised Restaurant; provided that if the default is not by Developer, Developer is given written notice of the default and 30 days to cure said default.
(13) Developer fails or refuses to comply with any other provision of this Agreement or any requirement of the Carl's Jr.
System and does not correct the failure or refusal within 30 days (10 days for monetary defaults) after receiving written notice of default.
Except for monetary defaults, if the default cannot be corrected within 30 days, Developer shall have such additional time to correct the default as reasonably required (not to exceed 90 days) provided that Developer begins taking the actions necessary
to correct the default during the 30-day cure period and diligently and in good faith pursues those actions to completion.
If Developer has received 2 or more notices of default pursuant to this Section 13.A.(13) within the previous 12 months, CJR shall be entitled to send Developer a notice of termination upon Developer's next default under this Section 13.A.(13) in that 12-month period without providing Developer an opportunity to remedy that default.
B. Statutory Limitations
If any valid, applicable law or regulation of a competent governmental authority with jurisdiction over this Agreement requires a notice or cure period prior to termination longer than set forth in this Section, this Agreement will be deemed amended to conform to the minimum notice or cure period required by the applicable law or regulation.
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 be in default of the Development Agreement if they, or certain related parties, remain in default beyond the applicable cure period under several types of agreements. These include any other agreement with CJR (Carls Jr.) or its affiliates, any real estate lease, equipment lease, or financing instrument relating to a Franchised Restaurant, or with any vendor or supplier to a Franchised Restaurant.
If the default is not by the developer, the developer will be given written notice of the default and 30 days to cure it. For monetary defaults, the cure period is 10 days after receiving written notice. For non-monetary defaults, if the default cannot be corrected within 30 days, the developer has additional time, not exceeding 90 days, to correct the default, provided they begin taking necessary actions during the initial 30-day cure period and diligently pursue those actions to completion.
It's important to note that if a developer receives two or more notices of default within a 12-month period, Carls Jr. is entitled to send a notice of termination upon the next default without providing an opportunity to remedy it. Additionally, any valid, applicable law or regulation that requires a longer notice or cure period than what is set forth in the Development Agreement will take precedence, and the agreement will be amended to conform to the minimum requirements of that law or regulation.