What constitutes a 'Transfer' of a Carvel franchise, according to the agreement?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
16.1 Definition of Transfer. For purposes of this Agreement, "Transfer" as a verb means to sell, assign, give away, transfer, pledge, mortgage, or encumber, either voluntarily or by operation of law (such as through divorce or bankruptcy proceedings), any interest in this Agreement, the Franchised Business, substantially all the assets of the Franchised Business, or in the ownership of the franchisee (if you are an Entity). "Transfer" as a noun means any such sale, assignment, gift, transfer, pledge, mortgage, or encumbrance. A "Control Transfer" means any Transfer of (i) this Agreement or any interest in this Agreement; (ii) the Franchised Business or all or substantially all of the Franchised Business's assets; or (iii) any Controlling Interest (defined below) in you (if you are an Entity), whether directly or indirectly through a transfer of legal or beneficial ownership interests in any Owner that is an Entity, and whether in one transaction or a series of related transactions, regardless of the time period over which these transactions take place. References to a "Controlling Interest" in you mean either (i) 20% or more of the direct or indirect legal or beneficial ownership interests in your Entity or (ii) the acquisition of an ownership interest or other right or interest which grants the power (whether directly or indirectly) to direct or
cause the direction of management and polices of you or the Franchised Business to any individual or Entity, or group of individuals or Entities, that did not have that power before that acquisition.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, a 'Transfer' encompasses a broad range of actions related to the franchise agreement, the franchised business, or the ownership of the franchisee entity. Specifically, it includes actions such as selling, assigning, giving away, or otherwise transferring any interest in the franchise agreement or the business itself. This also extends to pledging, mortgaging, or encumbering the assets of the business, whether done voluntarily or through legal processes like divorce or bankruptcy.
A 'Control Transfer' is defined more specifically as any transfer of the franchise agreement, the franchised business assets, or a 'Controlling Interest' in the franchisee entity. A 'Controlling Interest' means owning 20% or more of the legal or beneficial ownership interests in the franchisee entity. It also includes acquiring an ownership interest or other right that grants the power to direct the management and policies of the franchisee or the franchised business.
For a prospective Carvel franchisee, this definition is crucial because it outlines the circumstances under which they would need to seek approval from Carvel to transfer their business or ownership stake. Failing to obtain prior written consent from Carvel for any transfer can result in the transfer being deemed void and can lead to a default under the Franchise Agreement, potentially resulting in termination of the agreement. This highlights the importance of understanding and adhering to the transfer provisions outlined in the Franchise Agreement.