Under the Carvel franchise agreement, does the franchisee have the right to terminate the agreement if Carvel breaches it?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
- The following language replaces the "Summary" section of Item 17(d), titled "Termination by franchisee":
You may terminate the Franchise Agreement on any grounds available by law.
- **7.
Termination by Franchisee.** The franchisee may terminate the franchise agreement under any grounds permitted under state law.
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.
-
- The prohibition by Indiana Code § 23-2-2.7-1(7) against unilateral termination of the franchise without good cause or in bad faith, good cause being defined therein as ". . . a material breach of the franchise agreement . . . ," supersede any contrary provisions contained in Section 17 (Default and Termination) of the Franchise Agreement in the State of Indiana.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, a franchisee's right to terminate the franchise agreement depends on the state where the franchise operates. For instance, the New York Addendum states that a franchisee may terminate the Franchise Agreement on any grounds available by law. Similarly, in Washington, the franchisee may terminate the franchise agreement under any grounds permitted under state law.
Conversely, in Virginia, it is unlawful for Carvel to cancel a franchise without reasonable cause, implying that certain grounds for termination stated in the franchise agreement may not be enforceable if they do not constitute "reasonable cause" as defined by the Virginia Retail Franchising Act. In Indiana, the prohibition against unilateral termination of the franchise without good cause, defined as a material breach of the franchise agreement, supersedes any contrary provisions in the franchise agreement.
These stipulations highlight the importance of understanding state-specific franchise laws. A prospective Carvel franchisee should consult with a legal professional to fully understand their termination rights and obligations in their specific state. This ensures that the franchisee is aware of the conditions under which they can terminate the agreement and the potential consequences of doing so.