During the term of the Carvel franchise agreement, what actions are franchisees prohibited from taking with Confidential Information or Trade Secrets?

According to Carvel's 2025 Franchise Disclosure Document, franchisees are restricted from certain actions regarding Confidential Information and Trade Secrets during the term of the franchise agreement. Carvel considers these items to provide a competitive advantage and be economically valuable to franchisees. These restrictions apply even before the Carvel shop opens, as franchisees receive valuable information and training about the Carvel system prior to opening. Franchisees are liable under these provisions even if they do not open the franchised business as required by the agreement.

Specifically, franchisees and their owners are prohibited from appropriating or using any Confidential Information or Trade Secret for any purpose outside the scope of the agreement. They cannot disclose or reveal any Confidential Information or Trade Secret to any person, except to their directors, officers, owners, management employees, or others with a legitimate business need who are also bound by confidentiality agreements at least as restrictive as the franchise agreement. Franchisees are also barred from divulging or using any Confidential Information or Trade Secret for the benefit of any other person or entity unless expressly authorized by Carvel.

Confidential Information includes items such as Carvel's manuals, marketing plans, the franchise agreement itself, customer information, and other information provided by Carvel, unless it qualifies as a Trade Secret. Trade Secrets are defined as information that has independent economic value from not being generally known or easily ascertainable by others who could profit from its disclosure or use. Examples of Carvel's Trade Secrets include the composition of their proprietary goods, recipes, advertising strategies, and marketing analyses. Information already publicly known or independently possessed by the franchisee is excluded from both Confidential Information and Trade Secret definitions.

These restrictions are designed to protect Carvel's proprietary information and maintain its competitive edge in the market. Prospective franchisees should carefully review Section 15 of the Franchise Agreement, as referenced in the Personal Covenants, to fully understand their obligations regarding Confidential Information and Trade Secrets. Violations of these covenants can lead to termination of the franchise agreement and other legal consequences.