If the Carvel franchise agreement is terminated before the Opening Date, what liquidated damages are owed?

According to Carvel's 2025 Franchise Disclosure Document, if the franchise agreement is terminated before the Opening Date, the franchisee will forfeit the initial franchise fee paid. The franchisee will not owe Carvel any liquidated damages.

This means that if a franchisee decides to terminate the agreement or if Carvel terminates the agreement due to a default by the franchisee before the store opens, the franchisee will lose the initial franchise fee. This fee is compensation for Carvel's time and expenses in setting up the franchise.

For a prospective Carvel franchisee, this highlights the importance of careful planning and due diligence before signing the franchise agreement and paying the initial franchise fee. If there are any doubts about the location, financing, or other aspects of the business, it may be best to resolve them before committing to the franchise. Franchisees should also be aware that certain states, such as North Dakota and Minnesota, may have laws that impact the enforceability of liquidated damages clauses.