What constitutes a Franchisee Default related to Service Fees under the Carvel agreement?

According to Carvel's 2025 Franchise Disclosure Document, a franchisee default occurs if the franchisee fails to pay any Service Fees when due. The franchisee has a 10-day period after receiving written notice of the default to correct the issue. If the default is not cured within this timeframe, it is considered a Franchisee Default under the agreement. Service Fees include the Comprehensive Support Fee and/or Billable Support Fee for POS system support.

This default provision is significant because Carvel reserves the right to suspend support services if a Franchisee Default occurs. However, even if support services are suspended due to a default, the franchisee is still obligated to continue paying the Service Fees throughout the term of the agreement. This means a franchisee could be paying for support they are not actively receiving if they fall into default.

In addition to failing to pay Service Fees, a Franchisee Default can also occur if the franchisee fails to perform its obligations under the agreement, defaults under any other agreement with Carvel, its franchisor, and/or their respective affiliates, or fails to satisfy and maintain the Minimum Specifications and other pre-requisites for Support Services under the agreement. These defaults also require a 10-day cure period after written notice.

Prospective Carvel franchisees should be aware of these default conditions and ensure they have sufficient financial resources to cover Service Fees and meet all other obligations to avoid potential disruptions in support services and additional financial burdens. It is also important to understand the Minimum Specifications for Support Services to ensure compliance and avoid default.