In the event of a dispute requiring interpretation by a court or arbitrator, what agreement does the equity interest owner make regarding the construction of the Carvel Personal Covenants and Section 15 of the Franchise Agreement?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
If any term in these Personal Covenants or in Section 15 of the Franchise Agreement must be interpreted by a court or an arbitrator of competent jurisdiction, you agree that: (i) these Personal Covenants are made freely and voluntarily by you, an experienced businessperson, in an arms-length commercial transaction; (ii) these Personal Covenants or Section 15 of the Franchise Agreement should not be construed in the same manner or under the same body of law as analogous terms in a contract of employment; (iii) if a court or arbitrator finds that any term in these Personal Covenants or Section 15 of the Franchise Agreement is invalid or unenforceable for any reason, that term will automatically be modified to the minimum extent necessary to make it valid and enforceable, and the modification will be deemed to have been a part of these Personal Covenants or Section 15 of the Franchise Agreement as of the date you sign these Personal Covenants or the Effective Date of the Franchise Agreement, whichever is later; (iv) the court or arbitrator should strictly construe these terms in favor of enforcement; and (v) if any term could be construed two ways, one of which would render the term valid and the other of which would render the term invalid, the court or arbitrator will construe the term in the manner that renders it valid.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to the 2025 Carvel Franchise Disclosure Document, equity interest owners agree to specific interpretations regarding the Personal Covenants and Section 15 of the Franchise Agreement if a court or arbitrator is involved in resolving a dispute. These agreements are designed to ensure the enforceability of these covenants and sections.
Specifically, the equity interest owner acknowledges that these covenants were made freely and voluntarily as an experienced businessperson in an arm's-length commercial transaction. This means the terms should not be interpreted as analogous to those in an employment contract. Furthermore, if any term is deemed invalid or unenforceable, it should be modified to the minimum extent necessary to make it valid and enforceable. This modification is considered part of the original agreement from the date of signing.
The agreement also stipulates that the court or arbitrator should strictly construe these terms in favor of enforcement. If a term has multiple possible interpretations, the one that renders the term valid should be chosen. This aims to ensure that the covenants and agreements are upheld to the fullest extent possible.
These provisions are important for prospective Carvel franchisees because they clarify how disputes related to confidential information and restrictive covenants will be handled. By agreeing to these terms, equity interest owners acknowledge the importance of these protections for Carvel and commit to their enforcement, which can impact their rights and obligations should a dispute arise.