What happens if a Carvel franchisee is in default of their agreement regarding the obligation to purchase goods?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
- A. Section 3.5 (Interest) is amended to provide that, at our option, we may permit you to pay past due amounts and related interest by adding a surcharge on each gallon of our proprietary mix that you purchase, payable when you purchase the mix. If we permit you to pay past due amounts and interest by a surcharge, the surcharge will be calculated so as to liquidate the past due amount and applicable late charges within 120 days.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to the 2025 Carvel FDD, if a franchisee fails to pay amounts due, Carvel has the option to allow the franchisee to pay past due amounts and related interest by adding a surcharge on each gallon of proprietary mix purchased. This surcharge would be payable at the time of mix purchase.
The FDD specifies that if Carvel permits this surcharge method, the surcharge will be calculated to liquidate the past due amount and applicable late charges within 120 days. This provides a structured repayment plan for the franchisee to catch up on overdue payments while continuing to operate their business.
This amendment to Section 3.5 (Interest) of the franchise agreement offers Carvel some flexibility in managing franchisee defaults related to purchase obligations, potentially avoiding immediate termination and providing a path for franchisees to remedy their financial situation. It is important for prospective franchisees to understand the conditions under which Carvel might offer this option and how the surcharge would be calculated, as well as the consequences of failing to meet the surcharge payment schedule.