Under what condition are transfer fees collectable for a Carvel franchise transfer?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
n concerning the Transfer and transferee that we may request. We will have a reasonable time (not less than 30 days) after we have received all requested information to evaluate the proposed Transfer. You and/or your transferee must satisfy, in addition to others that we may specify, the conditions in Sections 16.3.B. (pay all sums owed), 16.3.C. (not in default), 16.3.E. (transferee meets qualifications), 16.3.H. (sign assignment and guaranty), 16.3.I. (sign general release), and 16.3.L. (remain liable for pre-Transfer obligations). You must pay us a transfer fee equal to 10% of the then-current initial franchise fee. You and your Owners must sign the form of agreement and related documents that we then specify to reflect your new ownership structure. We may withhold our consent on any reasonable grounds or give our consent subject to reasonable conditions.
- 16.5 Related Party Transfers. Notwithstanding anything to the contrary in Section 16.3 (Control Transfer) or 16.4 (Non-Control Transfers), you may Transfer cumulatively (i) up to a 49% (100% on your death or disability) interest in this Agreement, the Franchised Business, or your Entity to your spouse, your parent, or your child or (ii) up to a 100% interest in this Agreement, the Franchised Business, or your Entity to any of the original guarantors to this Agreement, provided you (a) give us prior written notice of the Transfer; (b) you and/or your transferee comply with the conditions in Section 16.3.C. (not in default), 16.3.E. (transferee meets qualifications), 16.3.H. (sign assignment and guaranty), 16.3.I. (sign general release), and 16.3.L. (remain liable for pre-Transfer obligations); (c) you pay us a transfer fee equal to 10% of the then-current initial franchise fee; and (d) if the Transfer is of a Controlling Interest, the transferee and any other personnel we designate satisfactorily complete before the date of Transfer our Management Training Program.
- 16.6 Transfer Upon Death or Incapacity. If you or any Owner dies, becomes incapacitated, or enters bankruptcy proceedings, that person's executor, administrator, personal representative, or trustee must apply to us in writing within three months after the event (death, declaration of incapacity, or filing of a bankruptcy petition) for consent to Transfer the person's interest. The Transfer will be subject to the provisions of this Section 16, as applicable, except there shall be no transfer fee due. For purposes of this Section, "incapacity" means any physical or mental infirmity that will prevent the person from performing his or her obligations under this Agreement (i) for a period of 30 or more consecutive days or (ii) for 60 or more total days during a calendar year. In the case of Transfer by bequest or by intestate succession, if the heirs or beneficiaries are unable to meet the conditions of Section 16.3.E. (transferee meets qualifications), the executor may Transfer the decedent's interest to another successor that we have approved, subject to all of the terms and conditions for Transfers contained in this Agreement. If an interest is not disposed of under this Section 16.6 within 180 days after the date of death or appointment of a personal representative or trustee, we may terminate this Agreement.
- 16.7 Security Interests.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, transfer fees are applicable in several scenarios when a franchise is transferred. For non-control transfers, where the transfer does not result in a change of control, the franchisee must pay Carvel a transfer fee equal to 10% of the then-current initial franchise fee. The franchisee must also provide advance notice and copies of all proposed contracts related to the transfer. Both the franchisee and the prospective transferee must meet specific conditions, including paying all outstanding sums, not being in default, and ensuring the transferee meets Carvel's qualifications.
For related party transfers, such as transfers to a spouse, parent, or child, a transfer fee is also required. Specifically, if transferring up to a 49% interest (or 100% upon death or disability) to a spouse, parent, or child, or up to 100% to any of the original guarantors, the franchisee must pay a transfer fee equal to 10% of the then-current initial franchise fee. Other conditions include providing prior written notice, complying with specific sections regarding default, qualifications, and signing agreements, and remaining liable for pre-transfer obligations.
However, the FDD also specifies an exception: no transfer fee is due if the transfer occurs due to death or incapacity of the franchisee or an owner. In such cases, the executor, administrator, personal representative, or trustee must apply to Carvel in writing within three months of the event, and the transfer will be subject to the standard provisions, excluding the transfer fee. In the event of a standard control transfer, the transfer fee is equal to 50% of the then-current initial franchise fee.