Can Carvel offset credits or balances owed to the franchisee against liquidated damages owed by the franchisee?

According to Carvel's 2025 Franchise Disclosure Document, Carvel has the right to offset any credits, balances, or amounts it owes to a franchisee against any amounts the franchisee owes Carvel under Section 18.3, which pertains to liquidated damages. This means that if a franchisee owes Carvel liquidated damages due to early termination or other breaches of the franchise agreement, Carvel can reduce that debt by any money it already owes to the franchisee.

This provision is important for prospective franchisees to understand because it clarifies Carvel's rights regarding financial obligations. If a franchisee believes they are owed money by Carvel for any reason, but also owe Carvel liquidated damages, the franchisee should expect Carvel to apply the owed amount as a credit against the damages. This could impact the franchisee's cash flow and financial planning in the event of a dispute or termination.

It is common for franchise agreements to include provisions addressing how financial obligations between the franchisor and franchisee are handled, especially in the context of termination. The ability to offset debts can provide Carvel with a streamlined way to recover amounts owed to them, while franchisees need to be aware of this potential offset when assessing their financial liabilities and assets in relation to the franchise agreement.