If a Carvel franchisee is late in paying any obligation, how may Carvel apply any payment the franchisee makes?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
- 3.7 Application of Funds; Withholding of Payments.
If you are late in paying any obligation you owe us or our affiliates, we or our affiliates may apply any payment you make to any obligation you owe us or our affiliates, whether or not you make any designation to the contrary.
You may not withhold or set off payment of any amount you owe us or our affiliates on grounds of alleged non-performance of any obligation we or they owe you.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, if a franchisee is late in paying any obligation to Carvel or its affiliates, Carvel or its affiliates have the right to apply any payment made by the franchisee to any obligation owed, regardless of any specific designation the franchisee might make. This means Carvel has broad discretion in how they allocate payments received from a franchisee who has outstanding debts.
This clause benefits Carvel by allowing them to prioritize the application of funds to outstanding obligations as they see fit. For a prospective franchisee, this means that even if you intend a payment to cover a specific invoice, Carvel can instead apply it to older, perhaps more critical, debts like overdue royalties or advertising fees. This could lead to further late fees and interest charges on the obligation you thought you were paying.
Furthermore, the FDD states that franchisees are not allowed to withhold or offset payments owed to Carvel or its affiliates based on any alleged non-performance of obligations by Carvel. This reinforces Carvel's right to receive payments without deductions or delays, even if the franchisee believes Carvel has not met its own obligations. Franchisees should be aware of this clause and its potential implications for managing their financial relationship with Carvel.