Can the arbitrator award interest on damages incurred for breach of the Carvel franchise agreement?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
The parties agree that the arbitrator may award interest from the date of any damages incurred for breach or other violation of this Agreement, and from the date of the award, until paid in full, at a rate to be fixed by the arbitrator, but in no event less than 2.5% per annum above the Citibank Preference Rate quoted for the corresponding periods, as reported in The Wall Street Journal, or the maximum rate permitted by applicable law, whichever is less.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, in disputes resolved through arbitration, the arbitrator has the authority to award interest on damages. Specifically, the arbitrator can award interest from the date damages were incurred due to a breach or violation of the Franchise Agreement.
The interest rate will be determined by the arbitrator, but it will not be less than 2.5% per annum above the Citibank Preference Rate quoted for the corresponding periods, as reported in The Wall Street Journal, or the maximum rate permitted by applicable law, whichever is less. This ensures that the interest rate is pegged to a recognized financial benchmark while also respecting legal limits on interest rates.
This provision offers a degree of financial protection to either Carvel or the franchisee in the event of a breach, as the awarded party can receive compensation for the time value of the money owed. It also incentivizes both parties to resolve disputes promptly to minimize the accumulation of interest. However, the actual interest rate is subject to the arbitrator's discretion within the specified range, introducing some uncertainty.