If Carvel operates the Franchised Business after termination but the termination is later deemed invalid, what accounting is Carvel obligated to provide?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
If we terminate this Agreement under Section 17 (Default and Termination), we will have the right to immediately enter and take possession of your Franchised Business to maintain continuous operation of the Franchised Business, provide for orderly change of management and disposition of personal property, and otherwise protect our interests.
If we exercise this right, you will vacate the Franchised Business promptly and completely, rendering all necessary assistance to us to enable us to take prompt possession, and you will have no right to any revenue that we earn while operating the Franchised Business.
If you dispute the validity of our termination of this Agreement, we will nevertheless have the option, which you irrevocably grant, to operate the Franchised Business pending the final, unappealed determination of the dispute under this Agreement.
If an arbitrator or court of competent jurisdiction makes a final, unappealed determination that the termination was not valid, we will make a full and complete accounting for the period during which we operated the Franchised Business.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to the 2025 Carvel Franchise Disclosure Document, if Carvel terminates a Franchise Agreement under Section 17 (Default and Termination), they have the right to take possession of the franchised business to maintain operations and protect their interests. During this period, the franchisee has no right to any revenue Carvel earns. However, if the franchisee disputes the termination and it is later determined by an arbitrator or court that the termination was invalid, Carvel is obligated to provide a full and complete accounting for the period they operated the franchised business.
This means that Carvel must provide a detailed record of all income and expenses related to the operation of the franchise during the time they were in control. This accounting would allow the arbitrator or court to determine the financial impact on both Carvel and the franchisee, and to make any necessary adjustments or settlements. The franchisee would be entitled to revenues earned during the period of wrongful termination.
This clause protects the franchisee in the event of a wrongful termination. It ensures that the franchisee will receive a fair accounting of the business's performance during the period when Carvel was operating it, and that any financial losses suffered as a result of the wrongful termination can be properly assessed and compensated. Prospective franchisees should carefully consider this provision as it provides a safeguard against potential disputes over termination.