If a Carvel franchisee or their owners are convicted of a felony, can Carvel terminate the franchise agreement?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
- C.
You or any of your Owners, officers, or directors: (i) are convicted of or plead no contest to a felony or a crime involving fraud or moral turpitude or any other crime that we deem likely to have an adverse effect on the good name, business, goodwill, image or reputation of the Franchised Business, the System, or the Marks, whether on a local, regional, or national scale (including any such convictions or pleas that occurred prior to the Effective Date that we learn of after the Effective Date); (ii) engage in fraudulent, deceptive, unethical, criminal, or other conduct that, in our determination, is likely to have an adverse effect on the good name, business, goodwill, image, or reputation of the Franchised Business, the System, or the Marks, whether on a local, regional, or national scale; (iii) make, or have made, any material misrepresentation to us related to the Franchised Business or this Agreement; or (iv) knowingly maintain false books or records or submit any false reports to us related to the Franchised Business.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, Carvel can terminate the franchise agreement if a franchisee or their owners, officers, or directors are convicted of a felony. This also applies if they plead no contest to a felony or a crime involving fraud or moral turpitude. Carvel can also terminate the agreement if the crime is deemed likely to have an adverse effect on the good name, business, goodwill, image, or reputation of the Franchised Business, the System, or the Marks, whether on a local, regional, or national scale. This includes any convictions or pleas that occurred prior to the Effective Date that Carvel learns of after the Effective Date.
This provision gives Carvel broad discretion to terminate the agreement based on criminal activity of the franchisee or related parties, even if the crime is not directly related to the operation of the Carvel business. The determination of whether a crime is likely to have an adverse effect on Carvel's reputation is made by Carvel itself.
For a prospective franchisee, this means that any past or future criminal convictions or pleas could jeopardize their franchise agreement. It is important to understand the scope of this provision and to disclose any relevant criminal history to Carvel during the application process. Franchisees should also ensure that their owners, officers, and directors are aware of this provision and the potential consequences of criminal activity.
This type of clause is relatively common in franchise agreements, as franchisors want to protect their brand and reputation. However, the specific language and the degree of discretion given to the franchisor can vary. A prospective Carvel franchisee should carefully review this section of the franchise agreement with legal counsel to fully understand their rights and obligations.