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A40/100FDD 2024

Carl's Jr. — Litigation & Risk

Food & Beverage - Quick Service · FDD Items 3, 4 & 5

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Elevated Risk

6 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
6
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
40 / 100
FranchiseVerdict composite
Rating
STRONG
STRONG / MODERATE / CAUTION / AVOID

7(a) FOIA data · FY2020–present

SBA Loan Performance

Aggregated from public SBA 7(a) loan disclosures. Default rate is the share of loans that were charged off or settled for less than the full balance.

Total 7(a) loans
15
Government-backed loans issued
Default rate
0.0%
vs <3% typical · system-wide
5-yr default rate
—
Defaults
0 loans
Loans charged off or defaulted
Total loan volume
$26.2M
Avg loan size
$1.7M
Participating lenders
12

FDD Items 5, 6 & 17 — what you give up

Contract Risk Indicators

Mandatory arbitration
Not required
You retain the right to sue in court
Jury trial waiver
Waived
You give up the right to a jury trial
Non-compete
2 yrs
Post-termination restriction on similar businesses
Franchisor can compete
Yes
Franchisor can open competing locations in or near your territory
Right of first refusal
Yes
Franchisor can match any purchase offer when you try to sell
Governing law
Tennessee
State whose law governs disputes — relevant if you're not based there

What drove the 40/100 rating

Risk Score Breakdown

  1. 01MINORDeclining unit count (-0.6% YoY) indicates system contraction despite 20-year terms
  2. 02MINORHigh initial investment ($1.49M-$3.18M) with unprotected territory creates cannibalization risk
  3. 03HIGHMaterial litigation history including Canadian disclosure violations, non-compete enforcement actions, and cybersecurity breaches affecting franchisee reputation
  4. 04MINOR4% royalty on average $1.4M revenue yields only ~$56K annual royalties, suggesting thin operator margins after $371K net income claims
  5. 05MINORNo protected territory in declining system means new units directly compete with existing franchisees
  6. 06MEDMissing Item 19 financial performance representations limits ability to validate the disclosed $371,978 average net income claim

Severity inferred from FDD text — not a regulatory or legal classification

Litigation data from FDD Items 3, 4, and 5. SBA data from public 7(a) FOIA records (FY2020–present). Not legal advice — consult a franchise attorney before signing any franchise agreement.