What are the potential consequences if a Carvel franchisee fails to make advertising expenditures in accordance with Section 10.1.C regarding the Grand Opening Obligation?

According to Carvel's 2025 Franchise Disclosure Document, if a franchisee fails to meet the grand opening advertising expenditure requirements outlined in Section 10.1.C, Carvel has specific rights. Carvel can either require the franchisee to spend the remaining amount on local marketing advertising, which would be in addition to the franchisee's Local Marketing Obligation, or Carvel can spend an amount not exceeding the Grand Opening Obligation to promote the opening of the franchisee's Carvel business. In the latter case, the franchisee is obligated to reimburse Carvel for these expenses.

This stipulation ensures that Carvel franchisees fulfill their initial marketing commitments to properly launch their business. The Grand Opening Obligation, as detailed in Section 10.1.C, mandates that franchisees spend a specified amount on advertising within a 180-day window around their opening date (90 days before and 90 days after). The amount of the Grand Opening Obligation varies based on the location type, ranging from $6,000 for other locations, $15,000 for streetside locations, and $25,000 for the first four streetside locations in emerging markets.

For a prospective Carvel franchisee, this means that failing to adhere to the Grand Opening Obligation can result in either increased local marketing expenses or having to reimburse Carvel for marketing expenditures they undertake on the franchisee's behalf. Franchisees should be aware of these potential financial implications and ensure they allocate sufficient resources to meet the Grand Opening Obligation to avoid these additional costs.