Is Carvel allowed to establish other outlets, including those owned by Carvel or other franchisees, that compete with my Carvel franchise?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
We may open or franchise new Carvel® Shoppes near your Shoppe without consulting you, giving you the first right to open them, or paying you any compensation. Other affiliate-owned or franchised Carvel® Shoppes near your Shoppe that are already in existence or opened later under Franchise Agreements may (i) compete directly with you, (ii) provide services in close proximity to your Shoppe without compensating you, and (iii) possibly adversely affect the operation of your Shoppe or your development of Shoppes. Sales of products by our licensed manufacturer to grocery stores and supermarkets, club stores, super-stores, mass merchants and commissaries and exchanges on United States military bases and selected restaurants may also compete with your franchised Shoppe.
Other Businesses
Except as described in Item 1, we do not operate or franchise, or currently plan to operate or franchise, any business under a different trademark that sells or will sell goods or services similar to those that our franchisees sell. However, our affiliates, including the Affiliated Programs described in Item 1 and other portfolio companies that currently are or in the future may be owned by private equity funds managed by Roark Capital Management, LLC, may operate and/or franchise businesses that sell similar goods or services to those that our franchisees sell.
Item 1 describes our current Affiliated Programs that offer franchises, their principal business addresses, the goods and services they sell, whether their businesses are franchised and/or company-owned, and their trademarks. All of these other brands (with limited exceptions) maintain offices and training facilities that are physically separate from the offices and training facilities of our franchise network. Most of the Affiliated Programs are not direct competitors of our franchise network given the products or services they sell, although some are, as described in Item 1. All of the businesses that our affiliates and their franchisees operate may solicit and accept orders from customers near your business. Because they are separate companies, we do not expect any conflicts between our franchisees and our affiliates' franchisees regarding territory, customers and support, and we have no obligation to resolve any perceived conflicts that might arise.
Source: Item 12 — Territory (FDD pages 74–79)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, Carvel retains significant rights regarding the establishment of competing outlets. Carvel may open or franchise new Carvel Shoppes near a franchisee's location without any obligation to consult the franchisee, offer them the first right to open the new location, or provide any compensation. These other Carvel Shoppes, whether affiliate-owned or franchised, can directly compete with the franchisee's shop and potentially affect its operation and development. This applies to all Carvel Shoppes except for Co-Branded Shoppes in Streetside Locations with an Area of Protection. Carvel also retains the right to sell products through alternative channels of distribution, such as supermarkets and e-commerce, which may compete with a franchisee's retail shop.
Carvel and its affiliates retain all rights not specifically granted to the franchisee. This includes the right to establish or license franchises or company-owned businesses offering similar or identical products and services under the Carvel brand or any other marks, even at or near the franchisee's location. Carvel can also produce and sell approved products through alternative channels like supermarkets, convenience stores, and online platforms. They can also authorize others to do the same. Additionally, Carvel can advertise anywhere using their trademarks and can acquire or merge with other entities that operate similar or competitive businesses.
For prospective Carvel franchisees, this means that there is a risk of direct competition from other Carvel outlets or alternative distribution channels established by Carvel. The lack of an exclusive territory, except in limited cases for Co-Branded Shoppes in Streetside Locations, means that Carvel can open new locations nearby without restriction. This could impact a franchisee's sales and profitability. It is important for potential franchisees to carefully consider the market and potential competition before investing in a Carvel franchise.
It is also important to note that Carvel's affiliated programs and other portfolio companies owned by Roark Capital Management may operate businesses that sell similar goods or services. While Carvel states they do not expect conflicts between franchisees and these affiliates, it is a factor to consider. The FDD indicates that most affiliated programs are not direct competitors, but some are, as described in Item 1. Prospective franchisees should review Item 1 for more details on these potential competitive businesses.