Carl's Jr. Franchise Disclosure Document Analysis

System Unit Decline Across Three Consecutive Fiscal Years

The Carl's Jr. domestic franchised system has experienced a net decline in total franchised outlets every year from FY2020 through FY2022, falling from 1,073 to 1,018 locations. Openings were minimal (12, 4, and 5 respectively) while closures, terminations, and non-renewals were substantially higher each year.

Source: p.58

Renewal Requires Then-Current Agreement With Potentially Different Terms

Upon renewal, franchisees must execute the then-current form of franchise agreement, which may contain materially different fees, territory provisions, standards, or obligations than the original agreement. Franchisees must also remodel to current brand standards and sign a general release of all claims against CJR as conditions of renewal.

Source: p.51

Broad Post-Term Non-Compete Restricts Industry Participation

The Franchise Agreement imposes a 2-year post-termination non-compete covenant that prohibits the franchisee from involvement in any competing quick service restaurant business. The restriction extends geographically to a radius around any Carl's Jr. system location, not merely the franchisee's own territory.

Source: p.53