How does the litigation involving Arby's Restaurant Group, Inc. in Item 3 relate to the responsibilities of GoTo Foods as described in Item 11 for Carvel?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
who offer franchises resolved actions brought against them with settlements that involved their becoming subject to currently effective injunctive or restrictive orders or decrees. None of these actions have any impact on us or our brand nor allege any unlawful conduct by us.
The People of the State of California v. Arby's Restaurant Group, Inc. (California Superior Court, Los Angeles County, Case No. 19STCV09397, filed March 19, 2019). On March 11, 2019, our affiliate, Arby's Restaurant Group, Inc. ("ARG"), entered into a settlement agreement with the states of California, Illinois, Iowa, Maryland, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Oregon and Pennsylvania. The Attorneys General in these states sought information from ARG on its use of franchise agreement provisions prohibiting the franchisor and franchisees from soliciting or employing each other's employees. The states alleged that the use of these provisions violated the states' antitrust, unfair competition, unfair or deceptive acts or practices, consumer protection and other state laws. ARG expressly denies these conclusions but decided to enter into the settlement agreement to avoid litigation with the states. Under the settlement agreement, ARG paid no money but agreed (a) to remove the disputed provision from its franchise agreements (which it had already done); (b) not to enforce the disputed provision in existing agreements or to intervene in any action by the Attorneys General if a franchisee seeks to enforce the provision; (c) to seek amendments of the existing franchise agreements in the applicable states to remove the disputed provision from the agreements; and (d) to post a notice and ask franchisees to post a notice to employees about the disputed provision. The applicable states instituted actions in their courts to enforce the settlement agreement through Final Judgments and Orders, Assurances of Discontinuance, Assurances of Voluntary Compliance, and similar methods.
The People of the State of California v. Dunkin' Brands, Inc., (California Superior Court, Los Angeles County, Case No. 19STCV09597, filed on March 19, 2019.) On March 14, 2019, our affiliate, Dunkin Brands, Inc. ("DBI"), entered into a settlement agreement with the Attorneys General of 13 states and jurisdictions concerning the inclusion of "no-poaching" provisions in Dunkin' restaurant franchise agreements. The settling states and jurisdictions included California, Illinois, Iowa, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont, and the District of Columbia.
What This Means (2025 FDD)
According to the 2025 Carvel FDD, Item 3 addresses litigation involving Arby's Restaurant Group, Inc. (ARG), an affiliate of Carvel's parent company, GoTo Foods. The litigation was a settlement agreement with several states regarding ARG's franchise agreement provisions that prohibited the solicitation or employment of each other's employees. The states alleged these provisions violated antitrust, unfair competition, and consumer protection laws. ARG denied these conclusions but settled to avoid litigation, agreeing to remove the provision from its franchise agreements, not enforce it, and seek amendments to existing agreements. The FDD states that this action does not impact Carvel or its brand, nor does it allege any unlawful conduct by Carvel.
Item 11 of the Carvel FDD discusses the franchisor's assistance, advertising, computer systems, and training. It notes that GoTo Foods provides certain support and services to Carvel franchisees under a management agreement. GoTo Foods may delegate some responsibilities to CL (the previous franchisor of Carvel) or other affiliates, but Carvel remains responsible for all support and services required under the Franchise Agreement. This includes site selection review, where Carvel will review and accept a location if it meets their minimum site criteria. Carvel may require a site selection analysis from an Approved Supplier, costing an estimated $2,500 to $5,000.
While the Arby's litigation in Item 3 does not directly relate to the responsibilities of GoTo Foods outlined in Item 11 for Carvel, it is important to note that GoTo Foods is the parent company of both Carvel and Arby's. The litigation highlights the importance of ensuring franchise agreement terms comply with applicable laws and regulations. Even though Carvel states the Arby's litigation has no impact on the Carvel brand, prospective franchisees should be aware of the legal landscape and how it may affect franchise operations. Carvel franchisees should ensure that their franchise agreements and practices are compliant with all applicable laws, including those related to employment and competition.