Considering a Carvel Franchise? Don’t Overlook These 3 Important Franchise Fees

If you are considering a Carvel franchise, don’t get blindsided by these 3 important franchise fees (from the initial franchise fee, to the royalty fee, to the marketing fee found in Items 5 and 6 of Carvel’s 2017 FDD).

1.  Initial Franchise Fee:  $10,000 to $30,000

• When you sign a Franchise Agreement for a Full Shoppe, you must pay Carvel an initial franchise fee (the “Initial Franchise Fee”) of $30,000.

• When you sign a Franchise Agreement and an Express Schedule for an Express Shoppe, you must pay Carvel an Initial Franchise Fee of $10,000.

• When you sign a Franchise Agreement and a Hosted Express Schedule for a Hosted Shoppe, you must pay Carvel an Initial Franchise Fee of $10,000.

• Carvel will not refund any part of the Initial Franchise Fee paid under the Franchise Agreement.

• Carvel reserves the right to reduce and/or defer the payment of the Initial Franchise Fee under certain circumstances.

• Carvel may reduce and/or defer the payment of the Initial Franchise Fee as an economic incentive for a franchisee to open a certain location, with the determination made on a case by case review of all relevant economic factors. Carvel will make the decision on the amount of any waiver or reduction based on the condition of the premises and any special incentives that it may consider appropriate.

• Carvel also may offer to reduce and/or defer the payment of the Initial Franchise Fee for other reasons, including: (i) as an inducement for existing operators to open additional Shoppes, (ii) as an inducement for someone to reopen a closed Shoppe, (iii) as an inducement for someone to take over an operating franchised Shoppe, (iv) as an inducement for a professional multi-unit operator to open several Shoppes, or (v) to allow a franchisee to have additional money to spend on store improvements and marketing during the first months of operation.

• The amount of any waiver, deferral, or reduction will be made on an individual basis and may depend on the condition of the premises, the need for upgrades and remodeling, the need for special incentives, and/or other considerations.

• If you sign multiple Franchise Agreements with a Multi-Unit Addendum to develop a set number of Shoppes, Carvel may, in its sole discretion, offer a reduced Initial Franchise Fee for each Shoppe that you develop which it will determine on a case by case basis.

• You must pay Carvel all of the Initial Franchise Fees for all of the Shoppes that you commit to develop at the time you sign the Franchise Agreements with a Multi-Unit Addendum. If you fail to develop any of the Shoppes by the deadlines set forth therein or any Franchise Agreement(s) subject to the Multi-Unit Addendum are terminated, you will not receive a refund of any Initial Franchise Fees that you have prepaid.

• For calendar year 2016, the Initial Franchise Fee ranged from $0 to $30,000. Carvel did not enter into any Multi-Unit Addenda in 2016, and, therefore, did not offer reduced Initial Franchise Fees for the development of multiple Shoppes in 2016.

• Except as noted above, you do not pay Carvel or its affiliates any other fees or payments for services or goods before your Shoppe opens.

2.  Royalty Fee:  for Full Shoppes and Express Shoppes, $2.33 per liquid gallon of Mix you purchase. Hosted Express Shoppes will not pay a Royalty but Hosted Express Shoppes purchase Mix at Carvel’s then-current price for Hosted Express Shoppes, which will be different from the then-current price of Mix for Full Shoppes and Express Shoppes.

• Due Date:  At delivery to you of Carvel Mix.

• For Full Shoppes and Express Shoppes, Carvel may increase the royalty rate on January 1 of each year by the same percentage increase in the Consumer Price Index (“CPI”) during the prior year ending October 31.

3.  Advertising Contribution:  for Full Shoppes and Express Shoppes, currently $2.04 per liquid gallon of Mix you purchase, but this amount may increase (this fee does not apply to Hosted Express Shoppes)

• Due Date:  At delivery to you of Carvel Mix.

• Currently, you must make advertising contributions to the Ad Fund (as defined in Item 11) (the “Advertising Contribution”).

• Carvel may increase the advertising contribution on January 1 of each year by the same percentage increase in the CPI during the prior year ending October 31.

• Carvel may also increase the advertising contribution from time to time but it will not increase the advertising contribution in excess of 5% in any given 12-month period (provided these increases will be in addition to increases based on the CPI as discussed in the previous sentence).

• Unless otherwise stated, Carvel directly imposes all the fees in this table, you pay them to Carvel, and Carvel does not refund them. Carvel endeavors to impose these fees uniformly, but reserves the right to make variances in special circumstances.

• Carvel reserve the right to collect all fees due to it under the Franchise Agreement through EFT.

• “Net Sales” means all revenues generated by your Shoppe conducted on, from, or with respect to the Shoppe, whether the sales are evidenced by cash, check, credit, charge, account, barter, or exchange.

• Net Sales includes monies, gift card redemptions, or credit received from the sale of food, beverages, and merchandise, from tangible property of every kind and nature, promotional, or otherwise, and for services performed from or at the Shoppe, including off-premises services such as catering and delivery, or on premises activities such as games (e.g., slot machines), third party advertising (e.g., on menus), or other activities that use either the Carvel brand, the System, Proprietary Marks, or products that are the same or similar to the Products.

• Net Sales do not include the initial sales or reloading of gift cards, coupon discounts, the sale of food or merchandise for which refunds have been made in good faith to customers, the discounted portion of employee meals, the sale of equipment used in the operation of the Shoppe, nor will it include sales, meals, use, or excise tax imposed by a governmental authority directly on sales and collected from customers; provided that the amount for the tax is added to the selling price or absorbed therein, and is actually paid by you to a governmental authority.