What rights does Carvel reserve regarding locations outside the Area of Protection?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
ermine, in our sole discretion, which when combined with the Local Marketing Obligation (as specified in Section 10.1.E. (Local Marketing Obligation)) shall not exceed 5% of the Net Sales of the Franchised Business, payable each week on the Net Sales of the Franchised Business for the
preceding week (or on any other basis stated in the Manuals or in our written notice to you).
- 12. Section 4.1 (Reserved Rights): The following provisions are added to Section 4.1 of the Agreement.
- A. No Protected Rights. You do not have any protected or exclusive rights under this Agreement.
- B. Our Reserved Rights. We and our affiliates reserve all rights that we do not expressly grant you in this Agreement. We and our affiliates have the right to conduct, or authorize third parties to conduct, any business activities, under any name, in any geographic area, and at any location, regardless of the proximity to or effect on your Franchised Business. For example, without limitation, we and our affiliates have the following rights, without providing any rights or compensation to you:
- (1) We and/or our affiliates may establish or license franchises and/or company-owned businesses offering products or services that are similar or identical to the Approved Products using the System or elements of the System under the Marks or any other marks anywhere, including at or near your Accepted Location.
- (2) We and/or our affiliates may produce and/or sell Approved Products or any other products or services, and authorize others to produce and/or sell Approved Products or any other products or services, using the Marks, the System, and any other marks and/or systems we desire through any alternative channel of distribution located anywhere, including to and through (a) supermarkets, convenience stores, club stores, and other retail facilities not dedicated to the sale of the Approved Products, (b) mail order and e-commerce channels, and (c) kitchens devoted to the preparation of Products or Approved Products (often referred to as ghost, dark or cloud kitchens), which may use the Marks and may deliver to customers located anywhere.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, Carvel and its affiliates retain significant rights regarding business activities outside a franchisee's Area of Protection. Specifically, Carvel can establish or license franchises and/or company-owned businesses that offer similar or identical products or services to the Approved Products using the Carvel system, under the Carvel marks or any other marks, anywhere outside the Area of Protection. This means a franchisee's protected territory does not restrict Carvel from opening competing locations nearby, as long as they are technically outside the defined Area of Protection.
Carvel also reserves the right to produce and sell Approved Products or any other products or services, and authorize others to do the same, using the Carvel marks and system through any alternative channel of distribution located anywhere. This includes supermarkets, convenience stores, club stores, mail order, e-commerce channels, and Delivery Kitchens. Furthermore, Carvel and its affiliates can advertise using the Carvel marks anywhere, including inside and outside any Area of Protection.
Additionally, Carvel retains the right to acquire, be acquired by, or merge with another entity that has existing businesses or franchises similar to or competitive with Carvel businesses anywhere. Following such a transaction, Carvel can convert the acquired businesses to Carvel franchises, allow them to continue operating under another name, or convert the franchisee's business and existing Carvel businesses to the other name. These rights are reserved without providing any compensation to the franchisee.
For a prospective Carvel franchisee, these reserved rights highlight the importance of understanding the precise boundaries of the Area of Protection and the potential for Carvel to establish competing businesses or alternative distribution channels outside that area. It also underscores the possibility of changes to the brand or system resulting from mergers or acquisitions. A franchisee should carefully consider these factors and conduct thorough market research to assess the potential impact on their business.