Under the Carvel Receipts Agreement, can a franchisee claim the franchisor is in default of the Franchise Agreement due to a breach of the Receipts Agreement by the Company?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
Company's obligations and duties under this Agreement are independent of Franchisor's obligations and duties under the Franchise Agreement.
Franchisor shall not be in default of the Franchise Agreement for any breach of this Agreement by Company and any default of Company under this Agreement will not excuse Franchisee's performance of Franchisee's obligations hereunder or 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, the obligations of Carvel Franchisor SPV LLC (referred to as 'Franchisor') under the Franchise Agreement are separate and distinct from the obligations of 'Company' (an affiliate of Carvel) under the Receipts Agreement.
Specifically, the FDD states that Carvel Franchisor SPV LLC will not be considered in default of the Franchise Agreement if the Company breaches the Receipts Agreement. Furthermore, any default by the Company under the Receipts Agreement does not excuse the franchisee from fulfilling their obligations under either the Receipts Agreement or the Franchise Agreement.
This means that a Carvel franchisee cannot claim that Carvel has defaulted on the Franchise Agreement due to a breach of the Receipts Agreement by the Company. The franchisee is still obligated to perform their duties under the Franchise Agreement, regardless of any issues with the POS system support provided by the Company. This separation of obligations is a critical point for prospective franchisees to understand, as it allocates the risk of the Company's performance solely to the franchisee without recourse against Carvel under the Franchise Agreement.