What constitutes a Franchisee Default under the Carvel agreement related to Service Fees?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
Each of the following shall constitute a default under this Agreement, if not cured within ten (10) days following Franchisee's receipt of a written notice of such default (each a "Franchisee Default"): (i) Franchisee fails to pay, when due, any Service Fees; (ii) Franchisee fails to perform its obligations under this Agreement or defaults under any other agreement with Company, Franchisor, and/or each of their respective affiliates, or (ii) Franchisee fails to satisfy and maintain the Minimum Specifications and other pre-requisites for Support Services under this Agreement.
Franchisee shall pay Company the Comprehensive Support Fee and/or Billable Support Fee (collectively, the "Service Fees"), as applicable, for the Support Services provided by Company.
In the event of a Franchisee Default (as defined below), Company reserves the right, but not the obligation, to suspend part or all of the Support Services until such Franchisee Default is cured; provided however, that Franchisee shall continue to pay Service Fees, during the Term of the Agreement notwithstanding any suspension of Support Services due to a Franchisee Default.
Franchisee must pay Company interest on any amounts past due at the rate of 1.5% per month or portion of month, but not more than the maximum interest rate permitted by applicable law.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
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 ten-day period after receiving written notice of the default to correct the issue. Service Fees include the Comprehensive Support Fee and/or Billable Support Fee for POS system support.
This means that if a Carvel franchisee does not pay the required service fees on time, Carvel can issue a written notice, giving the franchisee ten days to make the payment. Failure to pay within this cure period constitutes a default under the Franchise Agreement.
Carvel has the right to suspend support services if a franchisee defaults on service fee payments, but the franchisee is still obligated to pay the service fees even if support is suspended. Franchisees must pay interest on any overdue amounts at a rate of 1.5% per month, or the maximum rate allowed by law.