Can Carvel terminate the Franchise Agreement without allowing the franchisee an opportunity to cure a default?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
- 17.2 Our Termination: No Opportunity to Cure.
We have the right to terminate this Agreement without affording you any opportunity to cure the default, effective on our sending of notice of termination to you (or the earliest date permitted by applicable law) if:
- A.
You or your Owners violate the Personal Covenants or other restrictive covenants, including the restrictions related to the use of Confidential Information or Trade Secrets, in Section 15 (Confidential Information; Restrictive Covenants).
B.
I.
You fail to open the Franchised Business by the later of (i) the Opening Deadline or (ii) the last extension of time granted to you pursuant to Section 6.5.D (Failure to Meet Deadlines), if any.
- J.
You, your affiliates, and/or any Entities owned by or affiliated with any of your Owners default under any other agreement between us and/or our affiliates, whether or not related to the Franchised Business, and fail to cure such default within any applicable cure periods (if any) under such agreement, provided that such default or failure to cure such default would permit us or our affiliate to terminate such agreement.
- K.
You operate your Franchised Business in any manner that we determine in our reasonable discretion poses a threat or danger to public health or safety, including, without limitation, if a public official requires you to close your Franchised Business as a result of your violation of any Laws relating to public health or safety.
- L.
You misuse or make any unauthorized use of the Marks.
Additional Disclosure. The following statements are added to Item 17.h.
Under Section 13.1-564 of the Virginia Retail Franchising Act, it is unlawful for a franchisor to cancel a franchise without reasonable cause. If any ground for default or termination stated in the franchise agreement does not constitute "reasonable cause," as that term may be defined in the Virginia Retail Franchising Act or the laws of Virginia, that provision may not be enforceable.
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- With respect to franchises governed by Minnesota law, we will comply with Minn. Stat. § 80C.14, Subds. 3, 4, and 5, that require, except in certain specified cases, that a franchisee be given 90 days' notice of termination (with 60 days to cure) and 180 days' notice of non-renewal of the Franchise Agreement, and that we not unreasonably withhold consent to the transfer of the franchise.
**2.
Franchisee Bill of Rights.** RCW 19.100.180 may supersede provisions in the franchise agreement or related agreements concerning your relationship with the franchisor, including in the areas of termination and renewal of your franchise.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, Carvel has the right to terminate the Franchise Agreement without providing an opportunity to cure certain defaults. Specifically, Carvel can terminate the agreement if a franchisee or their owners violate personal or restrictive covenants, including those related to confidential information or trade secrets, as outlined in Section 15 of the agreement. This termination is effective immediately upon sending notice.
Additionally, Carvel can terminate the agreement without an opportunity to cure if the franchisee fails to open the franchised business by the opening deadline or any granted extension. Carvel can also terminate the agreement without opportunity to cure if the franchisee, their affiliates, or entities they own default under any other agreement with Carvel or its affiliates, and fail to cure the default within any applicable cure periods, if the default would allow Carvel to terminate the other agreement. Further, Carvel can terminate immediately if the franchisee operates the business in a way that poses a threat to public health or safety, or if they misuse the brand's marks.
However, it's important to note that these termination rights may be subject to state laws. For instance, in Washington, the Franchise Investment Protection Act may supersede provisions in the franchise agreement regarding termination. Similarly, in Virginia, termination must be for "reasonable cause" as defined by the Virginia Retail Franchising Act. Minnesota law requires 90 days' notice of termination (with 60 days to cure) in most cases. Therefore, the specific circumstances and the applicable state laws will determine whether Carvel can terminate the agreement without an opportunity to cure a default.
This immediate termination clause is not uncommon in franchising, particularly for breaches that involve intellectual property, public safety, or failure to meet critical deadlines. However, prospective franchisees should be aware of these conditions and understand their rights and obligations under the Franchise Agreement and relevant state laws. Franchisees should consult with legal counsel to fully understand the implications of these termination clauses.