What happens if a Carvel franchisee complies with the requirements to notify Carvel of a third-party offer, but Carvel does not exercise its right of first refusal?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, if a franchisee adheres to the notification requirements regarding a third-party offer to purchase the Franchised Business or their interests, and Carvel chooses not to exercise its right of first refusal within the specified Option Period, the franchisee is then permitted to proceed with the sale to the third party. This sale must occur within 30 days after the expiration of the Option Period, and it must align with the terms and conditions that were initially disclosed to Carvel. This process ensures that Carvel has the first opportunity to buy back the franchise under the same terms offered by an outside buyer.
This provision protects the franchisee's ability to sell their business if Carvel is not interested in purchasing it. However, any material changes to the terms of the offer from the third party before the sale's closing will be considered a new offer, which would then be subject to Carvel's right of first refusal again. This clause prevents franchisees from making last-minute alterations to the deal that could undermine Carvel's initial decision not to exercise its option.
It is also important to note that Carvel's decision not to exercise its right of first refusal in this instance does not waive any other rights or provisions outlined in the Franchise Agreement. This means that even if Carvel allows the sale to proceed, it retains all other contractual rights and protections. The franchisee must also adhere to restrictions on advertising the sale of the Franchised Business without Carvel's prior written consent, including restrictions on using Carvel's Marks in advertising the sale or listing the business with brokers without approval.