If Carvel terminates the franchise agreement, does Carvel have the right to immediately take possession of the Franchised Business?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
- A.
Right to Operate.
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.
- B.
Right to Acquire Accepted Location.
If we terminate this Agreement under Section 17 (Default and Termination), you will, at our option, assign to us, or another franchisee we designate, your interest in any Lease for the Accepted Location, and will vacate the Franchised Business promptly and completely, rendering all necessary assistance to us or the other franchisee to enable it to take prompt possession.
If you or one of your affiliates owns the Accepted Location, we may elect to purchase the Accepted Location or, at our option, lease the Accepted Location from you or that affiliate for an initial five-year term with one renewal term of five years (at our option) on commercially reasonable terms.
If you and we cannot agree on a
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, if Carvel terminates the franchise agreement due to default under Section 17, they have the right to immediately enter and take possession of the franchised business. This allows Carvel to maintain continuous operation, manage the transition, dispose of personal property, and protect their interests. The franchisee must promptly vacate the premises and provide assistance to facilitate Carvel's possession. The franchisee will not be entitled to any revenue earned by Carvel during this period of operation.
Even if the franchisee disputes the validity of the termination, Carvel has the option to operate the franchised business until a final, unappealed determination is made. If an arbitrator or court determines that the termination was invalid, Carvel will provide a full accounting of the period during which they operated the business. This clause ensures that Carvel can maintain control and operation of the location, even during a dispute, which can be a significant advantage for the franchisor.
Additionally, upon termination under Section 17, Carvel has the option to have the franchisee assign their interest in the lease for the accepted location to Carvel or another designated franchisee. The franchisee must vacate the premises promptly and assist in the transfer of possession. If the franchisee or an affiliate owns the location, Carvel may elect to purchase or lease the location. The lease would be for an initial five-year term with an option to renew for another five years on commercially reasonable terms. If Carvel chooses to purchase the location, they can offset any amounts owed by the franchisee against the purchase price. This gives Carvel considerable control over the location of the franchise after termination, which is a common practice in franchising to protect the brand and market presence.