What is the 'Allowed Adjustment' for fees that may be increased by Carvel?

According to Carvel's 2025 Franchise Disclosure Document, the "Allowed Adjustment" dictates the maximum amount by which Carvel can increase certain fees in a calendar year. This adjustment is determined at Carvel's discretion and will not exceed either 50% of the fee in effect at the start of the calendar year, or the actual increase in costs and expenses incurred by Carvel or its affiliates to provide the related goods or services to the franchisee. This policy is in place to provide some predictability regarding fee increases.

Several fees that Carvel charges are subject to the Allowed Adjustment. For example, the Guest Relations Fee, currently $30 per guest complaint or contact request not addressed within 72 hours, can be increased, but not by more than the Allowed Adjustment in any given year. Similarly, the Non-compliance Fee, ranging from $25 to $500 depending on the violation, and the Failure to Comply with Standards or Law Fee, up to $5,000 plus expenses, are also subject to this limitation on annual increases. The Learning Management System License Fee, currently $170 per year, the Sublease Administration Fee, currently $200 per month, and the Lease Renewal/Extension Review Fee, ranging from $500 to $2,000, are also subject to the Allowed Adjustment.

This "Allowed Adjustment" provides a degree of protection for franchisees against drastic fee hikes, as increases are capped based on a percentage of the existing fee or the actual cost increase to Carvel. However, it's important to note that Carvel has the option to choose which of the two methods to use in calculating the maximum adjustment. Prospective franchisees should consider this when evaluating the potential financial impact of these fees over the term of the franchise agreement.