What happens if a Carvel franchisee fails to make the minimum advertising expenditures?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
hanges. | As incurred | You must refresh your Shoppe every five years and must remodel your Shoppe every ten years to meet our then-current Standards. We may require you to pay us, our affiliates, or our designee this fee to inspect your Shoppe and produce a site survey and/or design plan that will comply with these | | Type of Fee1, 4 | Amount advertising (1% of Net Sales for Ice Cream Trucks or Co-Branded Shoppes) | Date Due | Remarks collectively exceed 5% of your Net Sales. See Item 11 for what will count towards meeting your obligation. If you fail to make the minimum advertising expenditures, we may do so on your behalf and you must reimburse us for our expenses. We may also elect to collect all or a portion of the Local Marketing Obligation from you and (i) contribute it to the Ad Fund, (ii) conduct national, regional, or local advertising, (iii) spend it on local advertising, or (iv) contribute it to your Advertising Cooperative. | | Promotions and Advertising Materials | Up to 110% of our or our affiliates' actual costs and expenses related to the goods you purchase from us or them. Currently, you must pay $250 per month for point-of-purchase materials, in addition to other expenses for other promotions that may be conducted from time to time. | As incurred | You will participate at your own cost in temporary or permanent promotional campaigns that we establish (e.g., limited time offers, gift cards, coupons, loyalty programs, customer relationship management, and other supplemental marketing programs), which may be applicable to the System as a whole or to specific advertising market areas, and promotional programs your Advertising Cooperative establishes. We may require or permit you to purchase items from us or our affiliates necessary to participate in such campaigns, such as counter cards posters, banners, signs, photographs, loyalty program rewards, give away items, and gift cards. | | Insufficient Funds Fee | Up to 110% of our or our affiliates' actual costs and expenses | On invoice | If we draft money from your account under our electronic funds transfer ("EFT") or draft system, and there are insufficient funds to cover the draft, we may charge this fee, which will include any bank return charges. This fee is in addition to interest on the amount due. | | Interest | The lesser of 1.5% per month or the maximum legal interest rate | On invoice | You must pay us or our affiliates interest on any amounts past due to us or our affiliates. | | Late Reporting Fee | Our then-current fee. Currently, $50 per week. | On invoice | You must pay this late fee if you fail to submit timely, complete and accurate reports, financial statements, tax returns, and statements of initial investment costs when due. We may change this fee in any year by no more than the Allowed Adjustment (as defined in Note 3). | | Type of Fee1, 4 | Amount | Date Due | Remarks | |-----------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------|-----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Item 6 — OTHER FEES (FDD pages 31–42)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, franchisees are required to spend a minimum amount on advertising, specifically 5% of Net Sales, although this can be 1% for Ice Cream Trucks or Co-Branded Shoppes. Net Sales includes all revenues generated by the Shoppe, including sales of approved products and services, gift card redemptions, and off-premises services like catering. Item 11 of the FDD specifies what counts toward meeting this advertising obligation.
If a Carvel franchisee fails to meet the minimum advertising expenditure requirements, Carvel has the right to take action. Carvel may choose to make the advertising expenditures on behalf of the franchisee. If Carvel does so, the franchisee is obligated to reimburse Carvel for all expenses incurred.
Alternatively, Carvel can collect all or part of the Local Marketing Obligation from the franchisee. Carvel then has several options for using these funds, including contributing them to the Ad Fund, using them for national, regional, or local advertising, spending them directly on local advertising initiatives, or contributing them to the franchisee's Advertising Cooperative. This gives Carvel considerable flexibility in how it addresses a franchisee's failure to meet their advertising obligations, ensuring that marketing efforts are maintained to support the Carvel brand.