Under the Carvel franchise agreement, can a director of Carvel be held liable for Carvel's obligations?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
THIS GUARANTY (the "Guaranty") is made by the undersigned individuals (whether one or more, jointly and severally, the "Guarantor"), in favor of Carvel Franchisor SPV LLC, a Delaware limited liability company ("Franchisor").
Guaranty.
Guarantor guarantees to Franchisor and its successors and assigns the following obligations (collectively, the "Obligations"): (i) the full and prompt payment and performance of all Franchisee's and its owners', officers', directors', agents' and employees' obligations to Franchisor under the Franchise Agreement, any amendment to the Franchise Agreement or any other agreement between Franchisee and Franchisor; and (ii) the full and prompt payment or reimbursement of all amounts, costs, expenses, claims, liabilities, or obligations Franchisor incurs under the Franchise Agreement.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, a director of Carvel Franchisor SPV LLC, the franchisor, cannot be held liable for the obligations of Carvel. However, the franchisee's owners, officers, and directors can be held liable under certain circumstances. Schedule C, titled "Guaranty of Payment and Performance," outlines that the Guarantor (typically an owner of the franchisee) guarantees to Carvel the full payment and performance of all the franchisee's obligations under the Franchise Agreement. This extends not only to the franchisee but also to its owners, officers, directors, agents, and employees.
This means that as a condition of Carvel entering into a franchise agreement, the franchisor requires a personal guarantee from the franchisee's owners. This guarantee ensures that Carvel can seek recourse directly from the franchisee's owners, officers, and directors if the franchisee fails to meet its financial or operational obligations. The guarantee covers all obligations under the Franchise Agreement, any amendments to it, or any other agreement between the franchisee and Carvel.
This requirement is significant for prospective Carvel franchisees because it means that the individuals with ownership or management roles in the franchisee entity must be willing to personally guarantee the franchisee's performance. This personal guarantee can put their personal assets at risk if the franchise fails to meet its obligations to Carvel. Before signing the franchise agreement, potential franchisees should carefully consider the implications of this personal guarantee and seek legal and financial advice.