What interest rate may the arbitrator award on damages for breach of the Carvel agreement?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
The parties agree that the arbitrator may award interest from the date of any damages incurred for breach or other violation of this Agreement, and from the date of the award, until paid in full, at a rate to be fixed by the arbitrator, but in no event less than 2.5% per annum above the Citibank Preference Rate quoted for the corresponding periods, as reported in The Wall Street Journal, or the maximum rate permitted by applicable law, whichever is less.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, in the event of a breach or violation of the franchise agreement, the arbitrator has the authority to award interest on any damages incurred. This interest can be applied from the date the damages were incurred and continue until the damages are paid in full.
The interest rate will be determined by the arbitrator, but it is subject to certain limitations. The minimum interest rate that can be awarded is 2.5% per annum above the Citibank Preference Rate, as quoted for the corresponding periods in The Wall Street Journal. However, the arbitrator cannot set an interest rate that exceeds the maximum rate permitted by applicable law.
This means that a Carvel franchisee could be required to pay interest on damages awarded against them, but the interest rate will be capped at the legal maximum and will have a floor based on the Citibank Preference Rate plus 2.5%. This provision aims to compensate the injured party for the time value of money and the delay in receiving payment for the damages incurred.