What happens if a Carvel franchisee becomes insolvent?

According to the 2025 Carvel Franchise Disclosure Document, the Franchise Agreement allows Carvel to terminate the agreement if a franchisee declares bankruptcy. However, an addendum for franchisees in Maryland clarifies that this provision may not be fully enforceable under federal bankruptcy law. Carvel states that it will enforce the termination to the extent that it is enforceable under the law.

This means that while Carvel retains the right to pursue termination in the event of a franchisee's bankruptcy, the actual legal outcome could be subject to the protections and regulations of U.S. bankruptcy code. Franchisees should be aware that federal law may override certain terms of the franchise agreement in bankruptcy proceedings.

Prospective Carvel franchisees should consult with a legal professional to fully understand their rights and obligations regarding termination and bankruptcy, especially in light of the potential limitations on enforceability. Franchisees in Maryland should pay particular attention to the Maryland addendum.