In the Carvel FDD, what happened to Section 16.8 regarding Right of First Refusal?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
16.8 Right of First Refusal.
- A.
Option Period.
If you receive and want to accept a bona fide written offer from a third party to purchase the Franchised Business or substantially all the interests in you (collectively, the "Interest"), you must give us: (i) prompt written notice of the offer, stating the name and address of the prospective purchaser and the price and terms of the offer; and (ii) copies of all written documents and other information reasonably related to the offer provided by or to the prospective purchaser.
For 30 days after we receive the information required by this Section (the "Option Period"), we will have the option to purchase the Interest on the same terms as the third party offers; provided, however, if any portion of the consideration the thirdparty offers is other than cash, we will have the option of substituting the equivalent cash value.
- B.
Appraisal Process.
If we cannot agree within a reasonable time on the equivalent cash value, the equivalent cash value will be determined by three independent appraisers using the following appraisal process (the "Appraisal Process"): (i) you will designate one appraiser and we will designate one appraiser, and the two appraisers that you and we designate will select a third appraiser, (ii) the majority determination of the three appraisers will be binding, (iii) each party will pay the appraiser's fee for the appraiser designated by that party, and (iv) you and we will each pay 50% of the third appraiser's fee.
- C.
Procedure.
In order for us to have enough information to decide whether to exercise our option, you must promptly deliver to us, at our request, any information about the Franchised Business that we request not otherwise called for by this Agreement.
If you comply with this Section 16.8 and we do not exercise our right of first refusal within the Option Period, you may, within 30 days after the expiration of the Option Period, sell, assign, and transfer the Interest to the third party specified in your notice in accordance with the terms and conditions of this Section 16.
Any material change in the terms of the offer before closing of the sale to the third party will constitute a new offer, subject to the same rights of first refusal by us as in the case of an initial offer.
Our failure to exercise our option under this Section 16.8 will not be waiver of any other provision of this Agreement.
- 16.9 Restrictions on Advertising Sale of Franchised Business.
You may not, without our prior written consent: (i) place in, on, or upon the Accepted Location any advertisement for the transfer, sale, or other disposition of the Franchised Business or any ownership interest in you, (ii) use any Marks in advertising (in any form of media) the transfer, sale, or other disposition of the Franchised Business or any ownership interest in you, or (iii) list the Franchised Business or any ownership interest in you with any business broker, real estate broker, agent, or attorney.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, Section 16.8 outlines the franchisor's Right of First Refusal if a franchisee receives an offer to purchase their Carvel business. If a franchisee wants to accept a third-party offer for their business, they must promptly notify Carvel in writing, including the prospective purchaser's information, price, terms, and all related documents.
Carvel then has 30 days (the "Option Period") to decide whether to purchase the franchisee's interest on the same terms as the third-party offer. If the offer includes non-cash consideration, Carvel has the option to substitute an equivalent cash value. If Carvel and the franchisee cannot agree on the cash value, it will be determined by three independent appraisers, one chosen by the franchisee, one by Carvel, and a third selected by the first two. The majority decision of the appraisers is binding, with each party paying for their appraiser and splitting the cost of the third.
If the franchisee complies with these requirements and Carvel does not exercise its right of first refusal within the 30-day Option Period, the franchisee may sell their interest to the specified third party within 30 days after the Option Period expires. Any material changes to the offer terms before the sale constitute a new offer, subject to Carvel's right of first refusal. Carvel's failure to exercise its option does not waive any other rights under the agreement. The franchisee is prohibited from advertising the sale of the Carvel business or any ownership interest without Carvel's prior written consent.