Are Carvel franchisees required to have all owners sign the Personal Covenants in Schedule B?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
1.4 Ownership and Guaranty.
- A. Owners of Equity. If you are a corporation, limited liability company, partnership, or other entity (collectively, an "Entity"), all of your owners of a legal and/or beneficial interest in the Entity, as such owners may be added or removed from time to time in accordance with Section 16 (Transfer) (the "Owners") must execute the "Personal Covenants" that is attached in Schedule B (the "Personal Covenants") and the "Guaranty of Payment and Performance" that is attached in Schedule C (the "Guaranty"). By executing the Personal Covenants and Guaranty, each Owner will be bound by the provisions contained in this Agreement, including the restrictions set forth in Section 15 (Confidential Information; Restrictive Covenants). Further, a violation of any of the provisions of this Agreement, by any Owner will also constitute a violation by you of your obligations under this Agreement. You represent that the individuals and Entities listed as "Owners" on Schedule A are currently your sole Owners. If you add or remove Owners in accordance with Section 16 (Transfer), we may unilaterally modify the list of Owners in Schedule A to reflect your then-current ownership structure.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, if the franchisee is a business entity such as a corporation, LLC, or partnership, all owners with a legal or beneficial interest in that entity must sign the Personal Covenants attached as Schedule B, as well as the Guaranty of Payment and Performance in Schedule C. By signing these documents, each owner agrees to be bound by the provisions of the Franchise Agreement, including the restrictions outlined in Section 15 regarding Confidential Information and Restrictive Covenants.
This requirement ensures that all individuals with a financial stake in the Carvel franchise are personally liable for upholding the terms of the Franchise Agreement. This is a common practice in franchising, as it prevents owners from shielding themselves behind a corporate structure to avoid responsibility for breaches of contract or other obligations. It also means that any violation of the Franchise Agreement by an owner will be considered a violation by the franchisee entity itself.
Prospective Carvel franchisees should carefully review Schedule B and Schedule C, along with Section 15 of the Franchise Agreement, to fully understand the obligations and restrictions that will apply to all owners of the franchise entity. This includes non-compete clauses and confidentiality requirements that extend beyond the term of the franchise agreement. Franchisees should also ensure that all owners are aware of these obligations before signing the Franchise Agreement, as their personal assets may be at risk if the franchise fails to comply with its terms.