If a Carvel franchisee's lease is terminated, does Carvel have grounds to terminate the franchise agreement?

According to the 2025 Carvel Franchise Disclosure Document, Carvel has grounds to terminate the franchise agreement if the franchisee's lease for the Host Facility is terminated. Specifically, if the franchisee fails to comply with any terms of the franchise agreement for the Host Facility, or if that franchise agreement is terminated or expires, Carvel can terminate the franchise agreement.

This condition is significant for prospective Carvel franchisees because it links the viability of their Carvel franchise to the status of the Host Facility. If the Host Facility loses its lease for any reason, the Carvel franchise operating within it is also at risk of termination. This creates an additional layer of risk beyond the franchisee's direct control, as the franchisee's business is dependent on the Host Facility maintaining its lease and complying with its own franchise agreement.

To mitigate this risk, a prospective Carvel franchisee should carefully review the terms of the Host Facility's lease and franchise agreement, if applicable, to understand the conditions under which they could be terminated or expire. Additionally, the franchisee should maintain open communication with the Host Facility's management to stay informed of any potential issues that could jeopardize the lease or franchise agreement. It would also be prudent to negotiate terms in the Carvel franchise agreement that provide some protection or recourse in the event of a Host Facility lease termination, such as the ability to relocate the Carvel franchise within a reasonable distance.