Can Carvel require franchisees to purchase specific services?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
endor (and we may collect from you the related upfront and ongoing fees for such POS System and pay the vendor on your behalf) and POS System support services from our affiliate. We may require you to maintain other support service contracts and/or maintenance service contracts from us, our affiliates, or designated Approved Suppliers.
We require you to accept major credit cards (Visa, MasterCard, American Express, and Discover) and other major payment methods (such as Apple Pay and Google Pay) for customer purchases,
participate in our Gift Card and Loyalty Programs, and participate in our in-shop mobile and online ordering program. These programs may require that you invest in additional equipment and incur fees from the credit card processing vendors, gift card processing vendors, and other hardware and software vendors that we designate.
We require you to purchase and maintain specific types of insurance coverage as described in more detail in the Franchise Agreement and the Manuals from insurance companies that meet our minimum Standards. We also specify the minimum amounts of insurance coverage you must maintain. All insurance policies must name us and others we designate as additional insureds. You must provide us with evidence of your insurance coverage before you begin operations at your Shoppe, upon annual renewal of your insurance, and otherwise within 10 days of our demand for proof. We reserve the right to obtain a master insurance policy on behalf of the System for certain types of coverage and require you to pay all or a portion of your proportionate share of coverage under the master policy to us or our Approved Supplier.
Currently, except as otherwise detailed above, you may purchase the remainder of the Goods that you use in your Shoppe from any source, as long as the Supplier and the Goods meet our minimum Standards. We may designate any Supplier as ineligible to supply Goods to you in our sole discretion. Further, we may designate one or more Approved Suppliers for any Goods upon written notice to you.
We or Our Affiliates as Approved Suppliers. Except as set forth in this paragraph, neither we nor our affiliates are currently Approved Suppliers for any Goods that you are required to purchase or lease. GoTo Supply provides supply chain, quality assurance, distribution, and logistics services to franchisees, and GoTo Rewards administers our gift card program, although neither are Approved Suppliers for any Goods.
Source: Item 8 — Restrictions on Sources of Products and Services (FDD pages 52–56)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, Carvel has the right to mandate that franchisees purchase specific services for their Shoppes. These required services can range from site selection analysis to participation in the Gift Card and Loyalty Programs. Carvel may require franchisees to obtain a site selection analysis from an Approved Supplier for any proposed site, which includes analyzing traffic patterns, demographics, and competitors.
Carvel franchisees are also required to participate in the Gift Card and Loyalty Programs, as well as the in-shop mobile and online ordering program. Participation in these programs may necessitate investments in additional equipment and the payment of fees to credit card processing, gift card processing, and other hardware and software vendors designated by Carvel. Furthermore, franchisees may be obligated to maintain support service contracts and/or maintenance service contracts from Carvel, its affiliates, or designated Approved Suppliers.
In addition, Carvel can require franchisees to use designated Approved Suppliers for point-to-point encryption ("P2PE") solutions, which include both hardware and software, to ensure secure payment processing services in conjunction with the POS system. The FDD also states that Carvel may collect upfront and ongoing fees for the POS System from franchisees and pay the vendor on their behalf. These stipulations ensure that Carvel maintains a level of control over the quality and consistency of services used within its franchise system, but also place specific financial obligations on franchisees.
These requirements mean that a Carvel franchisee cannot freely choose all service providers. While this ensures brand consistency and potentially leverages bulk purchasing power, it also limits the franchisee's autonomy and could potentially increase operational costs if the designated suppliers are not the most competitive in the market. Prospective franchisees should carefully evaluate these required services and associated costs to fully understand the financial implications of these mandates.