What is the maximum liability for Carvel in the event of a material breach of support services?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
- b. TO THE EXTENT COMPANY IS HELD LEGALLY LIABLE TO FRANCHISEE, COMPANY'S LIABILITY IS LIMITED TO ACTUAL LOSSES OR DIRECT DAMAGES FOR ANY CLAIM BASED ON A MATERIAL BREACH OF SUPPORT SERVICES, UP TO A MAXIMUM OF SIX (6) MONTHS OF THE SERVICE FEES PAID BY FRANCHISEE FOR THE APPLICABLE SUPPORT SERVICES DURING THE PERIOD OF MATERIAL BREACH.
- c. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IN NO EVENT WILL COMPANY OR ITS AFFILIATES BE LIABLE FOR (I) ACTUAL LOSSES OR DIRECT DAMAGES IN EXCESS OF THE AMOUNTS SET FORTH IN SECTION 11.b. ABOVE; (II) DAMAGES RELATED TO LOST REVENUE, SALES OR PROFIT; (III) DAMAGES FOR LOSS OF DATA OR SOFTWARE RESTORATION; (IV) DAMAGES RELATING TO FRANCHISEE'S PROCUREMENT OF SUBSTITUTE SUPPORT SERVICES (I.E., "COST OF COVER"); OR (V) INCIDENTAL, SPECIAL, CONSEQUENTIAL, INDIRECT, PUNITIVE OR CONTINGENT DAMAGES (INCLUDING DOWNTIME COSTS OR LOST PROFITS); IN EACH EVENT EVEN IF COMPANY OR ITS AFFILIATES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH POTENTIAL LOSS OR DAMAGE.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, Carvel's liability to a franchisee is limited in the event of a legal claim based on a material breach of support services. Specifically, Carvel's liability is capped at the actual losses or direct damages incurred by the franchisee. However, this liability is further limited to a maximum of six months of the service fees that the franchisee paid for the specific support services during the period when the material breach occurred. This means that even if a franchisee's actual losses exceed this amount, Carvel's financial responsibility is limited to the service fees paid over those six months.
This limitation of liability has significant implications for prospective Carvel franchisees. It means that franchisees bear the risk of losses exceeding the amount of service fees paid during the breach period. Franchisees need to assess whether this level of protection is adequate, considering the potential impact of a significant disruption in support services on their business operations and revenue.
Furthermore, the FDD specifies that Carvel and its affiliates will not be liable for certain types of damages, including lost revenue, sales, or profit; loss of data or software restoration; the cost of obtaining substitute support services; or incidental, special, consequential, indirect, punitive, or contingent damages, even if Carvel was aware of the potential for such losses. This further restricts the potential financial recovery for a Carvel franchisee in the event of a breach of support services. Franchisees should carefully consider these limitations and potentially seek legal counsel to understand the full scope of their rights and remedies.