What does the equity interest owner of a Carvel franchise agree to regarding the fairness and reasonableness of the obligations and covenants in Section 15 of the Franchise Agreement?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
As an inducement to us to enter into the Franchise Agreement, and in consideration of the direct and personal benefits you will derive from the Franchise Agreement, you agree that: (i) you have read and understand all the provisions of Section 15 (Confidential Information; Restrictive Covenants) of the Franchise Agreement; (ii) you will be personally bound by all of the obligations and covenants of Franchisee in Section 15 of the Franchise Agreement as if the obligations and covenants were made and given personally by you directly to us; and (iii) the obligations and covenants are fair and reasonable and will not deprive you of your livelihood.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, any person with an equity interest in a Carvel franchise must sign personal covenants, agreeing to be bound by Section 15 of the Franchise Agreement, which pertains to confidential information and restrictive covenants. These individuals acknowledge that they have read and understood their obligations under the Franchise Agreement and expect to benefit from it.
As an incentive for Carvel to enter into the Franchise Agreement, equity interest owners must agree to be personally bound by all obligations and covenants in Section 15, as if they were directly made between the equity holder and Carvel. This means that the equity holder is equally responsible for upholding the confidentiality and non-compete terms outlined in Section 15, just as the franchisee is.
Furthermore, the equity interest owner specifically agrees that the obligations and covenants within Section 15 are fair and reasonable and will not deprive them of their livelihood. This acknowledgement is crucial, as it demonstrates that the equity holder believes the restrictions placed upon them are not overly burdensome or detrimental to their ability to earn a living. This agreement is part of the consideration for Carvel entering into the Franchise Agreement, highlighting the importance Carvel places on protecting its confidential information and restricting competition.
This requirement ensures that all individuals with a financial stake in the Carvel franchise are committed to upholding the terms of the agreement, particularly those related to confidentiality and competition. By having each equity interest owner personally agree to these terms, Carvel aims to strengthen its ability to enforce these provisions and protect its brand and business interests.