Under the Carvel franchise agreement, can a franchisee be held liable for misuse of Confidential Information and Trade Secrets even if they do not open the Franchised Business?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
You agree that the Confidential Information and Trade Secrets provide you with a competitive advantage, that they will be economically valuable to you in the development of your Franchised Business, and that gaining access to Confidential Information and Trade Secrets is therefore a primary reason why you are entering into this Agreement.
You specifically agree that these restrictions are applicable even before you open the Franchised Business since you will receive valuable information and training about the System and the operation of the Franchised Business before you begin operations of your Franchised Business.
You agree that you are liable under this provision even if you do not open the Franchised Business as this Agreement requires.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, a franchisee can be held liable for the misuse of Confidential Information and Trade Secrets even if they do not open the Franchised Business. Carvel emphasizes that access to this information is a primary reason for entering into the franchise agreement, providing a competitive advantage and economic value to the franchisee.
The agreement specifically states that restrictions on using Confidential Information and Trade Secrets apply even before the Franchised Business opens. This is because franchisees receive valuable information and training about the Carvel system and the operation of the Franchised Business prior to commencement of operations.
The franchisee agrees to be liable for misuse of this information, regardless of whether the Franchised Business ever opens. This includes not appropriating or using Confidential Information or Trade Secrets for purposes outside the agreement, not disclosing such information to unauthorized individuals, and not using it for the benefit of any other person or entity without express authorization from Carvel.