If Carvel terminates the franchise agreement, what rights does Carvel have regarding the operation 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
purchase price for the Accepted Location in a reasonable time, the purchase price will be determined by three independent appraisers using the Appraisal Process. If we elect to exercise this option to purchase, we may set off all amounts you owe us or our affiliates under this Agreement against any payments for the purchase. You (and your Owners) agree to cause your affiliate to comply with these requirements.
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, it has the right to immediately take possession of the franchised business. This allows Carvel to maintain continuous operation, manage the change of management, dispose of personal property, and protect its interests. The franchisee must vacate the premises promptly and provide assistance to Carvel for taking possession. The franchisee forfeits any right to revenue earned by Carvel during this period of operation.
Even if the franchisee disputes the termination's validity, Carvel retains the option to operate the franchised business until a final, unappealed determination is made. Should an arbitrator or court determine that the termination was invalid, Carvel is obligated to provide a full accounting of the business's operations during the period it was operating the franchise.
In addition to the right to operate the business, Carvel also has the option to acquire the location of the franchise. The franchisee is obligated to assign their interest in the lease to Carvel or another designated franchisee. If the franchisee or an affiliate owns the location, Carvel can elect to purchase or lease it. The lease would be for an initial five-year term with an option to renew for another five years on commercially reasonable terms. If a purchase is elected and an agreement on price cannot be reached, the price will be determined by three independent appraisers. Carvel can offset any amounts owed by the franchisee against payments for the purchase of the location.
These stipulations ensure that Carvel can maintain its brand presence and operational continuity, even in the event of a franchise termination. Prospective franchisees should understand these conditions, as they outline Carvel's rights and the franchisee's obligations upon termination, including the potential loss of revenue and the transfer of property interests.