Sample UFOC

CARVEL CORPORATION UNIFORM FRANCHISE OFFERING CIRCULAR

200 Glenridge Point Parkway, Suite 200

Atlanta, Georgia 30342

(404) 255-3250

INFORMATION FOR PROSPECTIVE FRANCHISEES REQUIRED BY THE FEDERAL TRADE COMMISSION

To protect you, we've required your franchisor to give you this information. We haven't checked it and don't know if it's correct.

It should help you make up your mind. Study it carefully. While it includes some information about your contract, don't rely on it alone to understand your contract. Read all of your contract carefully. Buying a franchise is a complicated investment. Take your time to decide. If possible, show your contract and this information to an advisor like a lawyer or an accountant. If you find anything you think may be wrong or anything important that's been left out, you should let us know about it. It may be against the law.

There may also be laws on franchising in your state. Ask your state agencies about them.

Federal Trade Commission Washington, D.C. 20580

Date Issued: April 1,2006

CERTAIN STATES REQUIRE FRANCHISORS TO MAKE ADDITIONAL DISCLOSURES RELATED TO THE INFORMATION CONTAINED IN THIS OFFERING CIRCULAR. THESE ADDITIONAL DISCLOSURES ARE FURNISHED TO YOU IN EXHIBIT H TO THIS OFFERING CIRCULAR. THIS OFFERING CIRCULAR IS EFFECTIVE IN CERTAIN STATES ON THE DATES LISTED IN ATTACHMENT 1 OF THIS OFFERING CIRCULAR.

Ca rvel-U FOC-040106-v 1

FRANCHISE OFFERING CIRCULAR

CARVEL CORPORATION

200 Glenridge Point Parkway, Suite 200

Atlanta, Georgia 30342

(404) 255-3250

www.carvel.com

This Offering Circular describes a franchise for Carvel Full Stores and Carvel Express Stores. The Initial ! Franchise Fee for a Carvel Full Store is $30,000. The Initial Franchise Fee for a Carvel Express Store is ; $15,000. The estimated required initial investment is $247,474 to $388,724 for a Full Store and $46,850 to $232,860 for a Carvel Express Store. This excludes real estate expenses and does not represent your total investment. See Items 5, 6, and 7.

' RISK FACTORS:

, 1. THE FRANCHISE AGREEMENT PERMITS YOU TO ARBITRATE OR SUE; ONLY IN GEORGIA.

, OUT-OF-STATE ARBITRATION OR LITIGATION MAY FORCE YOU TO ACCEPlj A LESS

FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO ARBITRATE

WITH OR SUE CARVEL IN GEORGIA THAN IN YOUR HOME STATE!. CERTAIN STATES

, HAVE LAWS THAT SUPERSEDE THIS REQUIREMENT. SEE THE STATE ADDENDA TO THE

FRANCHISE AGREEMENT AND THE STATE ADDENDA TO THE OFFERING CIRCULAR.

THE FRANCHISE AGREEMENT STATES THAT GEORGIA LAW ! GOVERNS THESE AGREEMENTS. THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS. EVEN THOdlGH THE FRANCHISE AGREEMENT PROVIDES THAT GEORGIA LAW APPLIES, LOCAL IJAW MAY SUPERSEDE THIS REQUIREMENT IN YOUR STATE. SEE THE STATE! ADDENDA TO THE FRANCHISE AGREEMENT AND THE STATE ADDENDA TO THE OFFERJNG CIRCULAR.

'3.

4.

CARVEL GFiANTS YOU NO TERRITORIAL RIGHTS OTHER THAN THOSE: F,Olj* THE PREMISES OF THE CARVEL FACILITY UNDER THE FRANCHISE AGREEMENT. SEE ITEM 12 OF THIS OFFERING CIRCULAR. CARVEL MAY COMPETE WITH YCU BY ITS SALES TO SUPERMARKETS, CONVENIENCE STORES AND OTHER BUSINESSES OR DIRECT TO CONSUMERS.

THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.

Exhibit F does not

(Information about comparisons of franchisors is available. Call the state administrators listed in or your public library for sources of information. Registration of this franchise wijh the state mean that the state recommends it or has verified the information in this Offering Circular. If you learn that ^anything in the Offering Circular is untrue, contact the Federal Trade Commission and ithe state administrator listed in Exhibit F.

See Exhibit G for the agent authorized to receive service of process in your state. '

The issuance date of this Offering Circular is April 1, 2006. This Offering Circular, is effective in certain states on the dates listed in Attachment 1 of this Offering Circular.

Carvel-U FOC-040106-v1

\

ATTACHMENT 1

The effective dates of registration and the issuance dates of this Offering Circular or exemption in the registration and non-registration states listed below are:

State	Effective Date
California
Florida (exemption)
Hawaii
Illinois
Indiana
Maryland
Michigan
Minnesota
New York
North Dakota
Rhode Island
Utah (exemption)
Virginia
Washington
Wisconsin
All Other States	April 1,2006

Carvel-U FOC-040106-v1

TABLE OF CONTENTS

PAGE

ITEM

1.| US, OUR PREDECESSORS AND AFFILIATES..........................................................1...... 1

2.! BUSINESS EXPERIENCE..........................................................................................1..... 4

3. LITIGATION.............................................................................................................L.J...... 8

i i

4., BANKRUPTCY........................................................................................................J..1... 10

5.; INITIAL FRANCHISE FEE........................................................................................L..L... 10

6.' OTHER FEES..........................................................................................................J...!.... 11

1. INITIAL INVESTMENT............................................................................',.................!...!.... 14

8.! RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES..........................Li... 17

9.' YOUR OBLIGATIONS............................................................................;..................L.j.... 20

10L FINANCING............................................................................................_t.................L.L... 21

1l! OUR OBLIGATIONS...............................................................................:.................i.J......22

121 TERRITORY............................................................................................................[...].... 35

13l TRADEMARKS..........................................................................................................L.L. 36

14. PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION....... ...............!.!... 38

15J OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION ]

OFTHE FRANCHISE BUSINESS.................................................................................L. 39

16. RESTRICTIONS ON WHAT YOU MAY SELL...............................................................[... 39

17: RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION..................!....... 40

18j ARRANGEMENTS WITH PUBLIC FIGURES............................................................!...'.... 43

19J EARNINGS CLAIMS................................................................................_:.................]...[... 43

20: OUTLETS.................................................................................................................L..L.. 44

21J FINANCIAL STATEMENTS.......................................................................................J...I... 46

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22.! CONTRACTS..........................................................................................₍.................J...;... 47

23.| RECEIPT................................................................................................,......... LAST PAGE

EXHIBITS: EXHIBIT A

FINANCIAL STATEMENTS

EXHIBIT B CARVEL FRANCHISE AGREEMENT AND RELATED AGREEMlENTS:

Schedule A Schedule B -Schedule C -Schedule D -Schedule E -

Schedule of Events

Rider to Lease

Personal Covenants

Guaranty of Payment and Performance

State Law Addendum (If Required)

EXHIBIT C OTHER AGREEMENTS

EXHIBIT D INFORMATION ON FRANCHISEES

EXHIBIT E INFORMATION ON FORMER FRANCHISEES

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ITEM1 FRANCHISOR, ITS PREDECESSORS AND AFFILIATES

To simplify the language in this Offering Circular, "we", "us" or "our" means Carvel Corporation, the franchisor. "You" means the person or legal entity [includes a corporation, partnership, limited liability company or other legal entity and its owners, officers and directors] who buys the franchise. Our agents for service of process are disclosed in Exhibit G.

We do business under the name "Carvel." Our principal business address is 200 Glenridge Point Parkway, Suite 200, Atlanta, Georgia 30342, and our telephone number is (404) 255-3250. We were incorporated as a New York corporation in 1946. In 1969, we were reincorporated as a Delaware corporation. We are a wholly-owned subsidiary of Focus Brands Inc., f/k/a Carvel Holding Corporation, a Delaware corporation. Focus Brands Inc. maintains its principal place of business at 200 Glenridge Point Parkway, Suite 200, Atlanta, Georgia 30342.

The name "Carvel" has been associated with the ice cream business since 1934. We have operated retail stores selling ice cream and other frozen desserts and have granted franchises for these stores since 1947. We do not currently operate any Carvel stores. Thomas Carvel founded us. Thomas Carvel passed away in October 1990. We have no predecessors.

We are not currently involved in any businesses other than those described in this Offering Circular. We have not offered franchises in any other line of business. We do not own any franchises. None of our affiliates has offered franchises for the business described in this Offering Circular.

From 1998 until 2002, we granted certain area franchise development rights ("Area Franchises") to selected franchisees ("Area Franchisees") under a separate form of agreement (the "Area Development Agreement"). In March 2005, we ceased offering franchises for new Carvel City Center Stores. Although we stopped offering Area Franchises and franchises for new City Center Stores: (i) we reserve the right to begin offering them again anytime we choose; and (ii) we are continuing to honor those existing agreement.

From 1994 until 2002, we granted selected franchisees ("Route Dealers") the right to sell, deliver, and stock Carvel products in supermarkets ("Supermarket Routes"), under a separate form of agreement (the "Supermarket Route Agreement"). We referred to the program as the "Route Program." Although we stopped offering Supermarket Routes in 2002: (i) we reserve the right to begin offering them again anytime we choose; and (ii) we are continuing to honor existing Supermarket Route Agreements.

We have not sold master franchises for operation in the United States and do not currently expect to do so.

You and your landlord must enter into a Rider to Lease that we will provide that grants to Franchise Stores Realty Corp. ("FSRC"), our subsidiary, the right to take over your premises if you default under your lease or if your franchise agreement is terminated. You are solely responsible for securing a location that we will accept for any Facility under this Offering Circular. FSRC has the same address as us.

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EXHIBIT F STATE ADMINISTRATORS

EXHIBIT G AGENTS FOR SERVICE OF PROCESS

EXHIBIT H STATE ADDENDA TO OFFERING CIRCULAR

EXHIBIT I RECEIPT

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Affiliated Franchise Programs

Through common control or common management by either Roark Capital Group, an Atlanta based private equity firm or its affiliates, we are affiliated with the following other franchise programs. None of these other franchisors are obligated to provide products or services to you; however, you may purchase products or services from these franchisors if you choose to do so.

Money Mailer LLC, a franchisor of direct mail advertising businesses, is a Delaware limited liability company formed on November 24, 1997, and it maintains its principal place of business at 14271 Corporate Drive, Garden Grove, California 92843. Money Mailer's predecessor is Money Mailer, Inc., a California corporation incorporated on October 11, 1979. Money Mailer has been franchising since 1980 and as of December 31, 2005, had 294 franchisees. Money Mailer has not offered franchises in any other line of business.

Fastsigns International, Inc. ("Fastsigns"), a Texas corporation formed on April 30, 1986, is a franchisor of businesses specializing in producing and marketing signs, graphics, banners, ready-to-apply lettering, exhibits, displays, and digital imaging, and it maintains its principal place of business at 2542 Highlander Way, Carrollton, Texas 75006. Fastsigns does business under the name American Fastsigns, Fastsigns International, Inc., or Fastsigns. Fastsigns changed its corporate name to Fastsigns International, Inc. effective January 31, 2000. Fastsigns has been franchising since 1986 and as of December 31, 2005 had 410 domestic franchisees and 70 international franchisees. Fastsigns has no predecessor. Fastsigns, Inc. has not offered franchises in any other line of business.

On November 4, 2004, Focus Brands Inc. purchased from AFC Enterprises, Inc. its wholly-owned subsidiary Cinnabon International, Inc. ("International") and International's wholly-owned subsidiary, Cinnabon, Inc. ("Cinnabon"). Cinnabon is the leading specialty baked goods concept in the world. Cinnabon operates domestic company-owned bakeries, domestic and international franchised bakeries, international Seattle's Best Coffee franchises and licenses third parties to use the Cinnabon trademarks on products dissimilar to those offered in Cinnabon stores. As of December 31, 2005, there were 402 Cinnabon retail outlets operated by franchisees in the United States. Franchisees operated another 235 Cinnabon retail outlets outside the United States. Cinnabon does not currently operate any Cinnabon retail outlets in the United States or in international countries. International and Cinnabon are located in Atlanta, Georgia. Cinnabon also franchises Seattle's Best Coffee stores in Hawaii, on military bases in the United States, and in certain international countries. As of December 31, 2005, Cinnabon franchised 17 Seattle's Best Coffee in the United States and 140 units in other countries.

McAlister's Corporation ("McAlister's"), a Mississippi corporation formed on March 26, 1999, is a franchisor that offers full-size and non-traditional quick casual restaurant franchises offering counter-service, on-premises and take-out services featuring a complete or limited line of deli foods, including hot and cold deli sandwiches, baked potatoes, salads, soups, desserts, iced tea and other food and beverage products under the names "MCALISTER'S DELI" or "MCALISTER'S SELECT." McAlister's maintains its principal place of business at Suite 51, 731 South Pear Orchard Road, Ridgeland, Mississippi 39157. McAlister's does business under the names "MCALISTER'S DELI" or "MCALISTER'S SELECT." McAlister's has been franchising since 1999 and as of December 31, 2005 had 158 domestic franchises and 23 company-owned restaurants. McAlister's predecessor was McAlister's Management Corporation, a Mississippi corporation formed on May 19, 1994 and had its principal place of business at 2211 Jeff Davis Road, Oxford, Mississippi 38655. On April 2, 1'999, McAlister's Management Corporation was

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merged into McAlister's. McAlister's Management Corporation has not offeredi franchises in'any

other line of business.

i

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This Offering Circular describes a franchise for a single Full Store and a Carvel Express Store,

asfollows:

Carvel Full Store - where you produce and sell a full range of Carvel products.

j Carvel Express Store - where you produce and sell selected Carvel products.

This Offering Circular refers to Full Stores and Carvel Express Stores as "facilities." Unless otherwise noted, the disclosures in this Offering Circular apply to Full Sto):es and Express Stores.

Franchisee/Industry Contact Referral Program

We will pay a referral fee of $1,000 to the first person or company that introduces a prospective franchisee to us, if we approve the prospect and we and the prospect sign a Carvel Franchise Agreement within 6 months after the referral is made and the prospective franchisee pays us the associated initial fee. The prospective franchisee must have liquid assets of at| least $100,000 and a total net worth of $300,000. We will pay this referral fee when the referred prospective franchisee's Franchise Agreement is fully signed and the initial <fee is fully paid.

Please see Carvel's Lead Referral Program description for full details and condjtions.

, i

Competition and the Market

The market for your products and services is the general consuming public! Our goal is to | become the leading source of and consumers' choice for ice cream and frozen desserts. We

strive to .achieve this goal by offering a wide variety of superior ice cream and frozen desserts. i Our products include ice cream and frozen desserts in unique forms and popular flavors, and I health and diet products. We offer ice cream cakes and novelties, in addition' to soft and hard | ice; cream served in cones and cups. Carvel Full Stores and Carvel Express Stores differ from

many other dessert and ice cream shops because they offer great-tasting products that can' be i custom-shaped and custom-decorated for any occasion. ' I i

I : . ' I !

| You will compete with all other sellers of ice cream and frozen desserts, including supermarkets, convenience stores, restaurants, and other ice cream and frozen dessert retail (stores. You also will| compete with bakeries for customers who are looking for high quality, freshly-made cakes or novelties. The market in which you will operate is intensely and increasingly; competitive and rapidly-changing. Numerous other independent and chain vendors of ice cream and [other frozen dessert products and other snack, treat, and impulse food items exist,;.and others may enter the market. In addition, other Carvel Facilities may compete directly with your business.,

We use channels of distribution other than Carvel Facilities. Although we do not intend tojopen any new traditional, company-owned Carvel Facilities for the foreseeable future, we do intend to expand our sales to supermarkets, convenience stores, and other businesses and to grow our non-traditional foodservice business, including installing company-owned or operated or third party owned or operated satellite operations in locations like stadiums, turr,pike rest stops, university cafeterias, parks, beaches and large shopping venues, and engaging in various co-branded and store-within-a-store concepts and through mail order and the internet. We also may sell Carvel products, at wholesale, to other restaurant concepts owned, managed and/or franchised by us, Roark Capital Group or our affiliates. '

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The market for Carvel products is seasonal, with people tending to eat more ice cream and other frozen desserts when the weather is warmer, and tending to purchase more ice cream cakes for holidays and other special occasions. We urge you to consult your own independent business advisors to evaluate these and other factors before deciding to invest in a Carvel Facility.

You must comply with all laws and regulations on the preparation, labeling, storage, and sale of food and dairy products. Consult your lawyer. In addition, the laws, rules, and regulations that apply to businesses in general will affect you.

You must pass a test of basic competency in the English language and a criminal background check.

ITEM 2 BUSINESS EXPERIENCE

Chief Executive Officer and President: STEVEN ROMAN IE LLP

Steve became our Chief Executive Officer and President in April 2003. Steve was our President - Franchise and Foodservice from January 2002 to April 2003. From June 2000 to January 2002, he served as President and Chief Operating Officer of U.S. Franchise Systems, Inc., and its subsidiaries, the franchisors of the Best Inn (no longer owned or managed by U.S. Franchise Systems), Hawthorn Suites, and Microtel hotel franchise systems, headquartered in Atlanta, Georgia.

Senior Vice President. Franchise Sales and Development: GEOFF HILL

Geoff became our Senior Vice President, Franchise Sales and Development in August 2003. From February 2002 to August 2003, Geoff was our Vice President, Franchise and Foodservices Sales. From October 2000 to February 2002, he served as Vice President of Sales for Vital Link Business Systems, Inc. based in San Francisco, California.

Vice President, Marketing Services: GARY A. BALES

Gary became our Vice President, Marketing Services in August 2003. From April 2003 to August 2003, Gary was our Vice President, Marketing. Gary was our Vice President of Franchise Marketing from January 2003 to April 2003. Gary joined Carvel as Director of Franchise Marketing in August 2002. From January 2000 to August 2002, he was employed by Mrs. Fields Famous Brands, a multi-brand franchisor headquartered in Salt Lake City, Utah, where he held the positions of Vice President of Operations and Director of Marketing.

Vice President, Franchise Operations: DAVID MCDOUGALL

Dave has been our Vice President, Franchise Operations since November 2004. Dave was Cinnabon's Vice President of Franchise Support and Company Operations from September 2003 until November 2004. Previously, he was Cinnabon's Vice President of Franchise Support from July 2002 to September 2003. From March 2001 to July 2002, he was Cinnabon's Vice President of Company Operations and he was Cinnabon's International Director of Operations from March 1999 to March 2001.

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Vice President. Franchise Administration: TIM GOODMAN

Tim became our Vice President, Franchise Administration in March 2005. From August 2000 to

February 2005, Tim was Vice President, Franchise Administration for U.S. Franchise Systems

and its subsidiaries, based in Atlanta, Georgia., |

i Vice President, Development Services: JOCELYN BLAIN

Jocelyn has been our Vice President, Development Services since November 2004. She also is the Vice President, Development Services for our affiliate, Cinnabon, Inc., a position that she has held since June 2000.

Vice President, Real Estate: Mark Whittle

Mark has been our Vice President, Real Estate since April 2005. From April '.1004 to April 2005, Mark was the Director, Franchise Development for The Krystal Company \r: Atlanta, Georgia. From September 2003 to April 2004, Mark was a Director, Real Estate for Little 'Caesar Enterprises and was based in Atlanta, Georgia. From December 2002 to, September 2003, Mark was a Senior Leasing Director of Weingarten Realty and was based in Atlanta, Georgia. From October 1997 to October 2002, Mark was a National Director, Real Estate for¹ AFC Enterprises, Inc. and Church's Chicken, based in Atlanta, Georgia and from October 2002 to December 2002, Mark was a consultant for AFC Enterprises.

Director- Human Resources and Training: JEAN BOLAND

Jean has been our Director - Human Resources and Training since November 2004J From September 2003 to the present, Jean also has been Director - Human Resources and Training for Cinnabon, Inc. in Atlanta, Georgia and has worked for Cinnabon, Inc. since October 2001. From May 2000 to October 2001, Jean was a search consultant with Elliot Associates in Alpharetta, Georgia.

Vice President Research & Development: STANLEY DORSEY

Stan became our Vice President, Research and Development in January 2005. From December 1997 to January 2005, Stan was the Vice President, Research and Development for AFC Enterprises, Inc. in Atlanta, Georgia.

Vice President - Supply Chain: RICHARD KAMPH

Rich became our Vice President, Supply Chain in April 2002. Before this, Rich was our National Director of Procurement and Logistics from April 2000 to March 2002,

Regional Vice President, Franchise and Foodservice Development: RAY TORRES

Ray became our Regional Vice President, Franchise and Foodservice Development in September 2003. From October 2002 to September 2003, Ray was a Director of Franchise and Foodservice Sales for us. From March 1999 to October 2002, Ray was a Franchise District Manager for us.

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Regional Vice President, Franchise and Foodservice Development: JEFF STURGIS

Jeff became our Regional Vice President, Franchise and Foodservice Development in October 2003. From March 2002 to October 2003, Jeff was a Director of Franchise and Foodservice Sales for us. From December 2000 to February 2002, Jeff was a Regional Sales Manager for Vitalink, located in San Francisco, California.

Chief Financial Officer: Lenore L. Krentz

Lenore has been our Chief Financial Officer since January 2006. Lenore has been the Chief Financial Officer of Cinnabon, Inc. since January 2002. Before that, she was Cinnabon's Vice President of Finance from August 1999 to December 2001.

Vice President - Legal: KATHRYN ROOKES

Kathryn became our Vice President, Legal in November 2003. From August 2002 to November 2003, Kathryn was our Vice President of Legal and Franchise Administration. From November 1997 to August 2002, she was employed by Choice Hotels International, Inc. in Silver Spring, Maryland where she held the positions of Senior Attorney and Staff Attorney.

Vice President, Licensing: BILL JACHTHUBER

Bill has been our Vice President, Licensing since November 2004. Bill was Cinnabon's Vice President, New Revenue Channels from March 2004 until November 2004. He also was Cinnabon's General Manager, New Revenue Channels from April 2002 to March 2004. He was a Director, Marketing Services for The Coca-Cola Company in Atlanta from June 2000 until April 2002.

Vice President International Operations: MICHAEL SHATTUCK

Michael has been our Vice President, International Operations since November 2004. Michael also has been Cinnabon's Vice President, International Operations since February 2002. Previously, he was Cinnabon's International Director of Operations from December 1999 to February 2002.

Managing Director - International Development: KIM PERROTTA

Kim became our Managing Director - International Development in November 2004. Kim was one of our Director of Franchise and Foodservice Sales from June 2002 to November 2004. From February 2000 to April 2001, Kim was the Vice President, Managing Director of The Nassier Group in Cairo, Egypt.

Chairman of the Board: NEAL K. ARONSON

Neal became our Chairman of the Board in March 2002. He served as our acting Chief Executive Officer from March 2002 through April 2002. He also is the founder of and has served as President of Roark Capital Group, a private equity firm in Atlanta, Georgia, since February 2001. From October 1995 to February 2001, Neal was Executive Vice President, Chief Financial Officer, and a Director of U.S. Franchise Systems, Inc. and its subsidiaries, the operators of the Best Inn (no longer owned or managed by U.S. Franchise Systems), Hawthorn Suites, and Microtel hotel franchise systems, headquartered in Atlanta, Georgia.

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Franchise Brokers

Business Alliance, Inc.

Business Alliance, Inc. ("BAI") was formed in 1992 and is located in Atlanta, Georgia. BA offers franchise brokerage services to more than 150 different franchise companies;and currently has

67 affiliated brokers. Daniel Prechtel is the President of BAI.

¹ i

Franchise Realty, Inc. (New York only)

Franchise Realty, Inc. ("FRI"), located in East Northport, New York, serves as our franchise sales agent in the State of New York. Raymond Villafana is the President of FRI and;has served in that capacity since 1989. ^!

FranChoice, Inc.

FranChoice, Inc. ("FranChoice") is a Minnesota corporation incorporated on Mar|ch 10, 2000. Its principal place of business is 6385 Old Shady Oak Road, Suite 290, Eden Prairie, Minnesota 55344, and its telephone number is (952) 942-5561. I

^! Jeffrey C. Elgin - CEO, Director

i

Jerf Elgin is the CEO of FranChoice, Inc. and until recently, held the positions of Presiden , CEO arid CFO of FranChoice, Inc. since its incorporation over 5 years ago.

i

Stephen K. Hockett - President

Steve Hockett became the President of FranChoice, Inc. as of January 1, 2003. From January 2002 through January 2003 he was an Independent Franchise Consultant working with FranChoice, Inc. From January 1993 to February 2002, he was a vice presideht for Great Clips, Inc., of Minneapolis, Minnesota.

Malcolm Gordon -Vice President, Franchisor Relations

Malcolm Gordon has been Vice President of Franchisor Relations for FranChoice, Inc. since November 2002. Before joining FranChoice, he held the position of Director ,for Maui Vyowi of Littleton, Colorado from October 2001 through November 2002. Mr. Gordon! was as a Broker with Stifel Nicolaus & Co., Inc. from February 2000 through September 2001.

Lori L Kiser-Block - Vice President

Lori Kiser joined FranChoice as a Consultant Development Manager in April, 2003 and became Vice President of FranChoice in November, 2003. Before joining FranChoice, Lori was Vice President of eFrame Technology, Omaha, from March 2002 until December, 2002. Before that Lori worked for Carlson Leisure Group, Minnetonka, MN in various positions staring as a Franchise Sales Manager in February, 1993 becoming Director of Franchise Sales in 199(5 and becoming Senior Director of Franchise Services until December 2001.

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ITEM 3 LITIGATION

Other than these 7 actions described below, no litigation must be disclosed in this Offering Circular.

Concluded Actions

Carvel Corporation v. James Baker, et al.

United States District Court, District of Connecticut

Civil Action No. 3:94 CV 1882 Filed 11/8/94

We filed this action against a number of franchisees representing 41 Carvel stores for a declaration that we and our franchisees may lawfully distribute, at wholesale, Carvel products in supermarkets, convenience stores and other retail outlets. On July 22, 1997, our motion for summary judgment was granted in part and denied in part. The claims were severed for separate trials for each franchisee. We settled with 34 claimants during the August 2001 through December 2001 time frame and paid a total of $1,657,500 to the defendants. We tried 3 claims that resulted in jury verdicts for the plaintiffs (Noonan, Giampapa and Marseila) totaling $737,000. In October 2002, we appealed the 3 jury verdicts. Two of the appeal issues were certified to the New York Court of Appeals, which decided these issues in our favor. We then settled each of these 3 cases, paying $225,000 to Noonan, $150,000 to Giampapa and $200,000 to Marseila.

John W. Lynch, et al. v. Carvel Corporation Connecticut Superior Court, Hartford, Connecticut CV 99-05877815 Filed 3/5/99

The only remaining plaintiff (Casavante), a former Carvel franchisee, was a former plaintiff in the Baker suit described above. His participation in the Baker suit was dismissed for lack of diversity jurisdiction. He then filed this suit alleging breach of contract in connection with our sales of cakes in supermarkets, alleged misuse of advertising funds and various quality and quantity issues relating to the Carvel ice cream mix. Casavante sought compensatory and special damages in an unspecified amount. We filed an answer in June 1999 denying liability. This case was in the discovery phase in May 2003 when we settled this case with our payment to Casavante of $99,000. This action has now been dismissed.

Carvel Corporation v. DePaola

Connecticut Superior Court, New Britain, Connecticut

Case No. CV 00-05054435 Filed 11/16/00

We filed this action against former franchisees after they converted their franchised Carvel stores into independent ice cream stores. We sought to enforce the non-compete provisions of the parties' franchise agreements and to protect our trademark rights. On April 24, 2001, the court granted our motion for a preliminary injunction closing both of DePaola's stores. DePaola filed counterclaims on January 8, 2001, seeking undetermined damages as a result of our sales in supermarkets, our alleged misuse of advertising funds, and various quality and quantity issues related to the Carvel ice cream mix. On August 20, 2002, this case was settled by the exchange of mutual releases only and no monies paid by either side.

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McNerney, Finkle and Barbado v. Carvel Corporation and Tuscan Dairy Farms, Inc. Superior Court, State of Connecticut, Judicial District of Hartford/New Britain id Hartford Docket No. CV 98-0579244S Filed 3/31/98

McNerney, Finkle and Barbado allege that we sold ice cream mix in short-fiUed packages! sold ice cream mix not in compliance with our specifications and requirements of law and misused advertising funds collected from franchisees. McNerney, Finkle andl Barbado | sought certification of this matter as a class lawsuit. McNerney, Finkle and Barbado; originally filed this case in the U.S. District Court for the Southern District of New York on October 20, 1997. McNerney, Finkle and Barbado withdrew the original complaint because counsel determined that that court lacked subject matter jurisdiction. Over 330 Carvel franchisees; have released us from any liability for these claims. On October 11, 2000, the court denied McNerney, Finkle and Barbado's petition for class certification, which denial was affirmed on appeal. This matter was settled in the Fall of 2001 by payment of $26,000 to McNerney, Finkle and Barbado.

Takla v. Carvel Corporation v. Alliant Foodservice, Inc. Supreme Court, State of New York, County of Westchester Index No. 14969-94 Filed 9/13/94

Franchisees in California brought suit seeking in excess of $1,000,000 for breach of contract based on alleged delivery, refrigeration and advertising problems. On April 24, 1998, the] parties settled: this action, with us paying $57,500 to franchisees and with Alliant paying $17,500 to the franchisees. [

(Action Unrelated to Carvel) (Carvel Not a Party) Forrest P. Gunter, on behalf of himself and all others similarly situated v. U.S. Franchise Systems, Inc., Michael A. Leven, Neal K. Aronson and Richard D. Goldstein U.S. District Court for the Northern District of Georgia, Atlanta Division Civil Action No. 100-CV-1244-RLV Filed 5/17/00

A purported class action lawsuit was brought against U.S. Franchise Systems, Inc. ("USFS") and certain of its present and former officers and directors. Gunter claimed to represent all purchasers of USFS' common stock during the period from May 6, 1999, through October 29, 1999, and sought unspecified damages on their behalf. Gunter alleged that U.S. Franchise Systems, Inc., Michael A. Leven, Neal K. Aronson and Richard D. Goldstein violated jfederal securities laws by concealing adverse material information about the business, business practices, performance, operations and future prospects of USFS. On April 15, 2002, this case was dismissed with prejudice by Gunter pursuant to a settlement between the parties. I Under the settlement, and without admitting liability, USFS paid $3.75 million of insurance proceeds to Gunter and other plaintiffs in exchange for the dismissal of the case. U.S. Franchise Systems, Inc., Michael A. Leven, Neal K. Aronson and Richard D. Goldstein did not admit any liability in connection with the settlement.

(Action Unrelated to Carvel) (Carvel Not a Party)

Best Franchising, Inc. and Hawthorn Suites Franchising, Inc. ("Franchisors") y. Terry P. Wynia,

Jean K. Wynia, et al.("Wynia") v. Best Franchising, Inc., Hawthorn Suites Franchising, Inc., U.S.

Franchise Systems, Inc., Microtel Inns and Suites Franchising, Inc., Mike Leven,

Romanielio and Mike Muir

U.S. District Court, Eastern District of Washington

Civil Action File No. CS-02-0175-EFS February 16, 2001

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Steve

Franchisors made claims against Wynia, most of whom were former franchisees of Franchisors, alleging monies due under the franchise agreements between them, which claims totaled in excess of $10 million dollars. Wynia asserted counterclaims alleging that Franchisors breached various terms of their franchise agreements, committed fraud with respect to their franchise agreements, violated the Franchise Investment Protection Act and Consumer Protection Act of the State of Washington, and breached a letter agreement with Wynia, which counterclaims totaled in excess of $30 million dollars. In January 2002, Wynia filed a complaint against the Franchisors, U.S. Franchise Systems, Inc., Mike Leven, Steve Romaniello and Mike Muir (CS-011-FVS; U.S. District Court, Eastern District of Washington), seeking rescission of a number of franchise agreements between the parties, restitution, damages and penalties for violations of the Franchise Investment Protection Act and" Consumer Protection Act in the State of Washington and for material breaches by some of the defendants of other agreements. As a result of Court Orders in February and March 2004, several of Wynia's claims were dismissed including the claim of a violation of the Consumer Protection Act. As a result of those rulings, Wynia's claim was limited to a claim that Franchisors breached the parties written license agreements by not delivering a hotel system as defined in the written franchise agreements and for selected violations of the Franchise Investment Protection Act. In August, 2004 Wynia entered into a settlement and release agreement with Steve Romaniello and the other individuals for the purpose of voluntarily dismissing with prejudice all claims Wynia had against these individuals. No monies were paid for these dismissals and none of the parties admitted any liability or fault. This case was eventually fully settled and dismissed when Wynia and the corporate defendants reached an agreement by which the parties dismissed all claims between them and the corporate defendants paid an agreed upon amount of money. None of the parties admitted any liability or fault to one another.

ITEM 4 BANKRUPTCY

No person identified in Item 1 or 2 of this Offering Circular has been involved as a debtor in proceedings under the U.S. Bankruptcy Code that must be disclosed in this Item.

ITEM 5 INITIAL FRANCHISE FEE

If you sign a Franchise Agreement for a Full Store, you pay an Initial Franchise Fee of $30,000 when you sign your Franchise Agreement. If you sign a Franchise Agreement for a Full Store and you do not have an Accepted Location, your Franchise Agreement will identify a trade area that you and we negotiate in which you must locate an Accepted Location.

If you sign a Franchise Agreement for a Carvel Express Store, you pay an Initial Franchise Fee of $15,000 when you sign your Franchise Agreement. If you sign a Franchise Agreement for a Carvel Express Store and you do not have an Accepted Location, your Franchise Agreement will identify a trade area in which you must locate an Accepted Location.

At times, we have abated all or a portion of the Initial Franchise Fee as an economic incentive for a franchisee to open a location, with the determination made on a case-by-case review of all relevant economic factors.

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On occasion, we permit installment payments of the Initial Franchise Fee on terms negotiated with the franchisee. (See Item 10.)

We will not refund any part of the Initial Franchise Fee.

If you are diligently pursuing the Opening Date and are still unable to me'st the completion deadlines in Schedule A to the Franchise Agreement, you may request an extension before the expiration of the missed deadline. We are not obligated to extend the missed deadline; however, if we approve an extension, we will charge you an extension fee of $2,500.00 per 6-

month extension ("Milestone Deadline Extension Fee").

i

You do not pay us any other fees or payments for services or goods before your Facility opens.

ITEM 6

OTHER FEES

Unless otherwise stated, we directly impose all the fees in this table, you pay them to us,land we do not refund them. We reserve the right to collect all fees due to us unjjer the Franchise Agreement through electronic funds transfer, which we plan to implement during 2006 on a weekly basis.

Name of Fee

Amount

Due Date

Rem: irks

Continuing Royalty

6.0% of Gross Sales

Payable by our account period on Gross Sales for the prior period

"Gross Sales" means all revenues generated by your Facility conducted on, froro or with respect to the Facility, whether the sales are evidenced] by cash, check, credit, charge, account, barter or lexchange. Gross Sales includes monies or credit received from the sale of food and merchandise, from tangible property of every kind arid nature, promotional or otherwise, and for services] performed from or at the Facility, including off-premises sen/ices , such as catering and delivery. Gross Sales do not include the sale of food or merchandise for which refunds have been made in good faith jo customers] the sale of equipment used in the operation of the Facility, nor will it include sales, meals, use ur excise tax imposed by a governmental authority directly on sales and collected from customers; provided thnt the amount: for the tax is added to the selling price o; absorbed therein, and is actually paid by you to a governmental authority._______

Advertising Contribution

For mall locations, currently, 1.5% of Gross Sales but we may adjust this amount up to 3.0% of Gross Sales

For non-mall locations, currently 3.0% of Gross Sales

Same as Royalty

You must make Advertising Contributions to the Ad Fund. See Item 11. ,

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Name of Fee	Amount	Due Date	..... Remarks
Carvel Savings Plan	As negotiated between you and us for each gallon of Mix you purchase	As you purchase Mix from distributor	Our Carvel Savings Plan provides you with a method of saving money to help defray the cost of any upgrades or refurbishment that you must complete under the Franchise Agreement.
EFT NSF Fee	Our out-of-pocket costs and an administrative fee	On invoice	If we draft money from your account under our electronic funds system, and there are insufficient funds to cover the draft, we will charge you the return costs charged by our bank and an administrative fee to cover our costs of addressing the nonpayment. This fee is in addition to interest on the amount due.
Replacement Manager Initial Training Fee	Up to $500 per trainee	Before attendance at training	You pay this fee only if you hire additional managers after your Facility opens.
On-Site Training and Assistance	$50 per hour plus trainers' expenses	On invoice	You can request on-site training and assistance at any time. We have no obligation to provide on-site training or assistance.
Consulting Fee	$500 per day	On invoice	We may offer you consultation services beyond the field support services under the Franchise Agreement, and if you accept them, we can charge you a consulting fee.
Non-Proprietary and Proprietary Products	Varies	On invoice	You must buy the Non-Proprietary Products and Proprietary Products from us or suppliers that we designate or approve. See Item 8.
Adulteration, Dilution or Failure of Sanitation Inspection Fee	Our expenses, including attorneys' fees, and inspection fees of up to $5,000 per visit	On invoice	If we inspect your Facility and find a violation, and we find the same violation at another inspection within one year, then you must pay the inspection fee and our expenses of correcting the violation, like travel expenses, cost of product sample analysis, and any attorneys' fees.
Interest	Lesser of maximum legal interest rate, or 12% per year	On invoice or by surcharge on your Mix purchases	You must pay us or our affiliates interest on any amounts past due to us or our affiliates.
Taxes	Our cost	On invoice	You must pay us all taxes (except our income taxes) we pay for products or services we furnish to you, or on our collection of the Initial Franchise Fee, Royalties, and Advertising Contributions from you.
Advances	Our cost	On invoice	You must pay us all amounts we advance to third parties for you, if any.
Relocation Extension Fee	$1,000 per year of extension on Term	Before we sign relocation Franchise Agreement	If you relocate to a new site and extend the Term based on your new lease, you must pay to extend the Term.
Transfer Fee	$7,500 for a Full Store; $5,000 for a Carvel Express Store	At transfer closing	Fee compensates us for our expenses and work. See Item 17k for a definition of transfer.
Renewal Fee	Our then-current initial franchise fee	Before we sign renewal Franchise Agreement

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Name of Fee

Amount

Due Date

Rem; irks

L

quidated Damages

The amount of Royalty that you owed us during the past 36 months. If less than 36 months have passed since opening and termination, the amount will be the average monthly Royalty during the time between opening and termination, multiplied by 36.

Within 30 days of termination of your Franchise Agreement

You must pay this fee only if the termination occurs after the Opening Date of your Facility and you are not insolvent at the time of termination.

Appraiser's Fee

50% of appraiser's fee

On invoice

You must pay this fee only if we elect to purchase your assets on termination or expiration of the Franchise

Agreement and you and we can not agree purchase price.

on the

Indemnification of us

Our cost

On invoice

You indemnify us from certain losses and expenses under the Franchise Agreement. I

Attorneys' Fees

Our cost

On invoice

If we become a party to a proceeding concerning an agreement between us and you, and we win, or if we . become a party to litigation or insolvency proceedings regarding your franchise, the,i you must pay pur reasonable attorneys' fees arid court costs!. If we terminate the Franchise Agreement for your default, you must pay us all our expenses from your default or termination, including reasonable attorneys' and experts' fees. < I I

Supplier/Product Testing fee

Cost of testing and inspection

As incurred

If you recommend new products and/or services of new suppliers to us, you must pay us this fee to cover our expenses for testing and insf ection. I j

Reinstatement Fee

$2,500

Before reinstatement

If we terminate your Franchise Agreement due to your default, you cure the default nnd want to be reinstated, and we agree to reinstate your Franchise Agreement, you must pay us a reinstatement fee.

Audit

Cost of audit

On invoice

If we audit you and find that you understated Gross Sales by 2% or more, you must reimburse us jfor the

cost of the audit (including ar^y reasonable and attorneys' fees).

accounting

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ITEM 7 INITIAL INVESTMENT

FULL STORE

Category of Investment	Amount	Method of Payment	When Due	To Whom Paid
Initial Franchise Fee	$30,000	Lump sum	At signing	Us
Real Estate and Improvements'	Varies	As incurred	As incurred	Landlord and others
Construction Build-Out	$85,000 to $185,000	As incurred	As incurred	Approved suppliers
Architect²	$3,000 to $10,500	As incurred	As incurred	Architect
Permits and licenses³	$1,500 to $3,000	As incurred	As incurred	Licensing authorities, utilities, etc.
Signs, Graphics and Grand Opening Advertising	$16,000 to $25,000	Lump sum	On delivery	Approved supplier
Large Equipment	$78,000 to $ 87,000	Lump sum	On delivery	Approved suppliers
Molds and Small Wares Package	$10,000 to $10,000	Lump sum	On delivery	Approved supplier
Opening Inventory⁴	$7,624	Lump sum	Just before opening	Approved distributor
Training Expenses	$1,750 to $2,000	As incurred	As incurred	Restaurants, hotels, etc.
Initial Inventory of Labels	$800	Lump sum	As incurred	Approved supplier
Security Deposit	$1,500 to $6,000	As incurred	As incurred	Landlord
Business Insurance⁵	$1,500 to $2,500	As incurred	As incurred	Insurance carrier
Additional Funds (3 months)	$10,800 to $19,300	As incurred	As incurred	Various
TOTAL⁶	Typically $247,474 to $388,724 (excluding real property)

" Except as described in this item, none of the expenses described in these tables is refundable. Only security deposits are normally refundable in full.

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CARVEL EXPRESS STORE

These figures do not include the cost of any co-brand business that you may operate in the I same space. |

Category of Investment		Amount	Method of Payment	When Due	i To Whom Paid I !
i [ Initial Franchise Fee		$15,000	Lump sum	At signing	Us	i
Real Estate and Improvements¹,		Varies	As incurred	As incurred i	Landlord and others i
Construction Build-Out		$500 to $100,000	As incurred	As incurred	Approved	suppliers
Ai	chitect²	$2,500 to $4,500	As incurred	As incurred	Architect	i
P.	irmits and licenses³	$250 to $2,500	As incurred	As incurred ,	i Licensing authorities, utilities, etc. j
Si	gns and Graphics	$4,200 to $6,200	Lump sum	On delivery ⁽	Approved	supplier
U	rge Equipment	$19,000 to $68,000	Lump sum	On delivery	Approved suppliers
M P	) ds and Small Wares ckage	$4,600 to $9,500	Lump sum	On delivery	Approved	supplier i I
0	tening Inventory⁴	$800 to $7,624	Lump sum	Just before opening	Approved distributor
Tr	lining Expenses	$-0-to $1,500	As incurred	As incurred	Restaurants, (hotels, etc. i .
In	tial Inventory of Labels	$-0-to $800	Lump sum	As incurred	Approved	¹ ■■ supplier
Se	curity Deposit	$-0- to $3,720	As incurred	As incurred \|	Landlord	s
Business. Insurance⁵		$-0-to $1,550	As incurred	As incurred	Insurance carrier i i
Additional Funds (3 months) ,		$-0-to $11,966	As incurred	As incurred	Various	1
TOTAL⁶		Typically $46,850 to $232,860 (excluding real property)				¹

¹ Carvel franchisees typically lease Facility premises under a written agreement. You make monthly rent

j payments directly to your landlord. The annual rent varies with the location and size of ';he premises. You

l must establish the Facility at your own expense. This includes buying or leasing ii building or store

! premises (typically 1,200 to 1,600 square feet for a Store and 150 to 500 square feet for a Carvel

I Express); building the Facility out to our specifications; purchasing exterior triademarked , signs;

i purchasing or leasing frozen dessert manufacturing and merchandising equipment, utensils, related trade

l fixtures, and furnishings; and purchasing inventory used in the manufacture, preparation, and dispensing

of Carvel products. You pay for these items and services. The cost varies for each Facility according to

the; location (like shopping center, free-standing location, suburban, downtown, etc.), the amount of

equipment, the construction or alteration costs, and the services involved. i

i You must select the location for your Facility. We expect you to retain an independent;expert to evaluate

thelproposed site. We cannot estimate the cost of this expert, which will depend on such factors as'the

intended area, expertise, and the extent to which studies or surveys are necessary. ' !

i ² You must hire an architect that we approve in writing at your own cost to make any nscessary changes to our standard equipment layout and specifications for a Facility. The cost of these architectural services will depend on the size and shape of the premises. i

³ You must obtain and pay for all necessary permits, licenses, and security deposits, including security

deposits for utilities and other necessary prepaid expenses.

I .

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⁴ You must purchase a sufficient initial inventory of Proprietary Products and Non-Proprietary Products to open the Facility. We currently sell some of these Proprietary Products at a profit to an authorized distributor not affiliated with us, who resells them directly to you. We may arrange for manufacturers of the Proprietary Products or Non-Proprietary Products to sell directly to our authorized distributors, rather than through us. See Item 8 below.

⁵ You must maintain the following insurance:

(a) Broad-form comprehensive general liability coverage and broad-form contractual liability coverage of at least $1,000,000 per person or event. This insurance may not have a deductible or self-insured retention of over $5,000.

(b) Fire and extended coverage insurance on your Facility and property in an amount adequate to replace them in case of an insured loss.

(c) If any vehicle is operated in the conduct of the franchised business, automobile liability coverage, including coverage of owned, non-owned, and hired vehicles, with minimum limits of liability at the greater of: (i) the amount required by all applicable state and federal laws; or (ii) $1,000,000 for each person killed or injured; and, subject to that limit for each person, a total minimum liability of $2,000,000 for any number of persons injured or killed in one accident, and a minimum limit of $300,000 for injury, and destruction or loss of use of property of third persons, as the result of any one accident.

(d) Business interruption insurance in sufficient amounts to cover the.rental of the Facility, previous profit margins, maintenance of competent personnel, and other fixed expenses for 6 months.

(e) Workers' compensation and employer's liability insurance {in statutory amounts), and unemployment insurance and state disability insurance {as required by governing law), for your employees.

If you fail to purchase the required insurance, we may obtain the insurance for you, but we have no obligation do so. If we obtain insurance for you, you must pay the premiums or reimburse us for them. We can change the required coverages and amounts.

It is difficult for us to estimate the cost of required insurance, since the cost varies widely depending on such factors as the size and location of the store premises, the gross sales actually achieved, the other types of insurance coverage included in the policy, and the value of the items insured.

⁶ The figures in the above tables include estimated labor, utilities and miscellaneous supplies, but do not include rent, real estate costs, royalty and advertising fees, replacement inventory, and packaging, etc. The additional funds required will vary by the area and the relative effectiveness of you and your staff. We and our affiliates do not finance your initial investment. The availability of financing will depend on such factors as the availability of financing generally, your creditworthiness, and other assets you may offer as security. See Item 10 below. In compiling these estimates, we relied on our experience in franchising Carvel businesses. You should review these figures carefully with a business advisor before buying a franchise.

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ITEM 8 i RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

This Item describes your obligation to buy or lease products or services from us or our designees, from suppliers we approve, or according to specifications we issue.

Youi must purchase the Proprietary Products and Non-Proprietary Products fr^om us, or from suppliers,we designate or approve (see Item 6). "Proprietary Products" include all products, [services, and equipment that now comprise, or in the future may comprise, a pait of our System [and that are proprietary to us including, without limitation, our Mix. Currently, we are thejonly 'supplier for the ice cream Mixes that you must purchase. "Non-Proprietary Products" include all inon-proprietary toppings, flavorings, other ingredients, components, cones, and other edible 'items sold as part of the products offered at Carvel Stores. Additionally, you must buy all printed paper, paper products, and plastic products bearing our Proprietary Marks (including, for example, dishes, containers, cartons, bags, napkins, and packaging supplies) from us |or' a distributor or manufacturer we authorize, or from another supplier we approve. Before obtaining .any iof these items from a supplier other than us or our authorized distributor or manufacturer, lyou must obtain our written approval, as described below.

We will sell or make available to you directly or indirectly through authorized distributors or manufacturers, your entire requirements of the Proprietary Products and Non-Proprietary Products. If we sell the Proprietary Products, Non-Proprietary Products, or any other products, supplies and equipment to you, we will do so at the same price we charge other similarly-situated franchisees.

i

i ;

,We receive fees and commissions from certain manufacturers and distributors; of Proprietary Products and Non-Proprietary Products for their sales to authorized distributors and to franchisees. We also receive profits as a mark-up when we sell items directly f.o you or to an authorized distributor who then sells the items to you. We and/or our affiliates have the right to receive payments from any supplier to you or to other franchisees within our franchise system and to use such monies without restriction and as we deem appropriate. This includes fees received from vendors that participate in our national accounts program and those vendors] that we designate as approved. Our total revenues for the fiscal year ended December 31, 2005, were $96,966,568; our total revenues from sales of Proprietary Products and Non-Proprietary Products, from sales directly to franchisees, sales directly to authorized distributors or from fees or commissions received from manufacturers, for the same period were $18,512,182, or 19.1J&

of our total revenues.

i

I

If you wish to purchase from another supplier, you must first obtain our approval using the

following procedures: (i) you must submit a written request to us for approval of the supplier;

(ii) the supplier must demonstrate that it is able to supply the item to you according tol our

Standards including our standards as to the artwork and text on the items; (iii) H the supplier iis

to receive access to any of our confidential information, trade secrets or logos, this supplier must

sign our standard form confidentiality agreement or our standard form license .'agreement; (iy)

the .supplier pays our then-current supplier evaluation fee; and (v)the ;'supplier must

demonstrate that it is in good standing in the business community with respect to its financial

soundness and the reliability of its products or services. Under the Franchise Agreement! we

have the right to test, at your expense, the product or service of any supplier you propose. | We

will give you notice of our approval or disapproval within a reasonable time, not to exceed 90

days. If we revoke approval of any supplier, we will give you written notice (in our Manuals or

otherwise).

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You must purchase exterior trademarked signs for your Facility that meet our specifications and from a vendor that we have approved in writing.

You may purchase certain fresh products used in the Facility from any supplier if the supplier's products meet our specifications.

We will provide you with a sample layout and specifications for the Carvel Facility. You must hire an architect that we approve in writing to prepare your plans and make any necessary changes to our standard layout and specifications. Our approval of your architect will not in any way be our endorsement of your architect or render us liable for your architect's performance. We currently have approved Source One Architectural and Development Services (SOADS) and International Banking Technologies, LLC. (www.ibtsource.com) as architects for street side Carvel Facility locations and ArcVision, Inc. (www.arcv.com) as an architect for a nontraditional Carvel Facility location.

Before we approve your final architectural renderings, plans, and specifications for a Facility, your architect or you must certify to us that the architectural renderings, plans, and specifications comply with the Americans with Disabilities Act (the "ADA"), the architectural guidelines under the ADA, and all applicable state and local codes for accessible facilities. On completion of construction and before opening, your architect and your general contractor or you must provide us with a certificate stating that the as-built plans comply with the ADA; the architectural guidelines under the ADA; all applicable state and local codes for accessible facilities; and all other applicable federal, state, and local laws, rules, or regulations. We inspect each Facility when construction is finished to make sure that it meets all of our standards and requirements.

You must hire a general contractor that we approve in writing to complete the build-out of your Carvel Facility, pur approval of your general contractor will not in any way be our endorsement of your general contractor or render us liable for your general contractor's performance. We currently have a contractor network of approved contractors from which you may choose your contractor.

You must purchase certain items of machinery and equipment, some of which are Proprietary Products, from sources we approve. Our approval of your equipment source will not in any way be our endorsement of your equipment source or render us liable for your equipment source's performance. You must purchase all of your equipment for the opening of your Carvel Facility through 1 of 2 consolidators that we have approved. These two consolidators are Source One Distribution www.s1dist.com and Trimark Foodcraft, Inc. (www.trimarkusa.com). These consolidators will coordinate the ordering and delivery of your equipment.

Periodically, we will conduct market research and testing to determine consumer trends and the salability of new food or non-food products and services. You must participate in any market research programs or test marketing of new products and services in your Facility, and provide us with timely reports and any other relevant information we request for the market research. You must purchase for your Facility a reasonable quantity of the test products, and you must effectively promote and make a reasonable effort to sell test products.

We estimate that the required purchases described above for a Store are 66% to 71% of the cost to establish the Store and about 48% of operating expenses.

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We have established specifications, standards, and criteria for the over 200 product items (like cups and cones) that a typical Carvel Store uses. We make these specifications and standards available to suppliers who wish to bid for approval. We approve the successful bidders! who then sell them to authorized distributors for resale to you or otherwise sell them directly to you. Our specifications, standards, and criteria for packaging material are available to you; however, our specifications, standards, and criteria for food items are not available to you.

You must purchase our specified computerized point of sale system (see Itemj 11).

We provide you with no material benefits (like renewal or granting additional franchises) based on your use of designated or approved sources, but the bidding process' described I above provides us and you with the material benefits inherent in the bidding process.: i

i ' i

You must purchase almost all of your food-related items from us or our approved distribulors or

manufacturers. About 2% of your total food-related purchases (milk and frjssh fruit) may be

purchased elsewhere. I '

Al| advertising and promotion of your Carvel Facility must conform to our specifications land standards and must be approved by us in advance. You must submit to us: for our approval copies of all advertising and promotional materials including business cards, sjgns, displays^!and mailouts. i

You must maintain specific types of insurance coverage as described in more detail in¹ the Franchise Agreement and our Manuals. We also specify the minimum amounts of insurance coverage you must maintain. All insurance policies must name us and others we designate as additional insureds. You must provide us with evidence of your insurance coverage before you begin operations at your Facility or otherwise within 10 days of our demand for.proof.

You and your landlord must sign the Lease Rider in Schedule B to the Franchise Agreement, which contains our required provisions for any lease or sublease you sign for a Facility. Franchise Stores Realty Corporation ("FSRC") is our affiliate, but is not a party to your ease. Under the lease terms, no funds are exchanged between FSRC and you or the' landlord.

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ITEM 9

YOUR OBLIGATIONS

THESE TABLES LIST YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE AND OTHER AGREEMENTS. THEY WILL HELP YOU FIND MORE DETAILED INFORMATION ABOUT YOUR OBLIGATIONS IN THESE AGREEMENTS AND IN OTHER ITEMS OF THIS OFFERING CIRCULAR.

Obligation	Franchise Agreement	Item in Offering Circular
a. Site selection and acquisition/lease	Article 6	Items 5, 6, 7,8 and 11
b. Pre-opening purchases/leases	Articles 6, 7 and 8	Items 5, 7,8, and 11
c. Site development and other pre-opening requirements	Articles 6, 7 and 8	items 7, 8 and 11
d. Initial and ongoing training	Article 13	Item 11
e. Opening	Sections 1.4, 7.3,15.3 and Schedule A	Item 11
f. Fees	Article 4; Sections 3.2.B, 6.6.B, 13.2.B, 15.6, 16.1,19.3, 21.2.A, 21.3.D and 22.4	Items 5 and 6
g. Compliance with standards and policies/Operating Manual	Articles 8 and 9; Section 15.1	Items 8, 11, 15, and 16
h. Trademarks and proprietary information	Article 11;Section1.3	Items 13 and 14
i. Restrictions on products/services offered	Article 8	Items 8 and 16
j. Warranty and customer service requirements	None	None
k. Territorial development and sales quotas	None	Item 12 \|
1. Ongoing product/service purchases	Article 8	Items 6 and 8
m. Maintenance, appearance and remodeling requirements	Article 7; Sections 3.2.A and 15.8	Item 11
n. Insurance	Article 16	Item 7
o. Advertising	Article 12	Items 6 and 11
p. Indemnification	Article 16; Section 11.3	Item 6
q. Owner's participation/management/ staffing	Section 15.9	Item 15
r. Records and reports	Article 17	Item 6
s. Inspections and audits	Article 17; Sections 7.3, 8.2,14.2,15.3, 15.4, 15.5 and 15.6	Item 6
t. Transfer	Article 19	Items 6 and 17
u. Renewal	Article 2	Items 6 and 17
v. Post-termination obligations	Article 21	Item 17
w. Non-competition covenants	Article 18 (See also Schedule C to Franchise Agreement)	Item 17
x. Dispute resolution	Article 22; Section 25.5	Items 6 and 17

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ITEM 10 FINANCING

We do not offer financing for trade fixtures, opening inventory, or any other purpose.

In certain circumstances, we will permit you to pay some of the Initial Franchise? Fee on the due date that you and we negotiate. In this case, you must sign a promissory note in thel form attached as Exhibit C. Under this note, you will not pay any interest unless you default on the note, at which time you must pay interest at 12% per year. We do not require any security interest under this note. You must personally guarantee this note. You may prepay this note at any time without penalty. On default, the entire principal balance accelerates and you must pay us 15% of the principal balance for our attorneys' fees. You also waive presentment, demand for [payment, notice of dishonor, intent to accelerate, protest and consent. Your default under this note_;also is a default under your Franchise Agreement.

i

We' may .refer you to leasing or financing companies not affiliated with us. We and our affi iates receive no fees or other financial benefits from any lender for your financing. We wi I not i guarantee your note, lease, or obligation, for any lender, or any other person or entity.

We participate in the SBA's Franchise Registry Program, We will modify the Franchise Agreement to permit you to give the SBA or an SBA-approved lender a security interest in the Facility.

We, may sell, assign, or discount to a third party any note, contract or other instrument you give to us. We have done so in the past, but do not intend to do so in the future. ;

ITEM 11 ,

OUR OBLIGATIONS

Except as listed below, we need not provide any assistance to you.

Pre-Opening Obligations

Before you open your Facility, we will:

1. ! Accept the location you select for your Facility (Franchise Agreement, Section 6.1).

We consider the following factors in accepting sites: population density and demographics, traffic flow, visibility, parking, access, household incpme, and local competition, including other Carvel Facilities. We expect you to retain _;an independent expert to evaluate the suitability of a proposed site. We may help you Select a site, but we do not warrant or represent that the selected site is suitable. We disclaim any responsibility for the suitability of the site. \

If your site is not identified by the time that you sign your Franchise Agrisement, you will have 120 days to locate a site for our review. If you and we cannot agrjse on a site, we may terminate your Franchise Agreement. If we terminate your Franchise Agreement for this reason, we will not refund the Initial Franchise Fee.

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2. Provide a sample layout and specifications for the Facility. You must hire an architect that we approve to prepare your plans and make any necessary changes to our standard layout and specifications. Our approval of your architect will not in any way be our endorsement of your architect or render us liable for your architect's performance. We inspect each Facility when construction is finished to make sure that it meets all of our standards and requirements. See Item 7 above. (Franchise Agreement, Section 7.2)

3. Make all Non-Proprietary Products and Proprietary Products available to you through independent distributors or manufacturers unless an act of God, governmental restriction, labor difficulty, or similar event prevents us from doing so. (Franchise Agreement, Sections 8.1 and 8.3)

4. Use reasonable efforts to fulfill or cause distributors or manufacturers to fulfill your orders for Non-Proprietary Products and Proprietary Products on a timely basis. If we, our distributors or our manufacturers cannot supply customers (including yourself and other franchisees) with the quantity and type of Non-Proprietary Products or Proprietary Products that they request, as a result of the causes described above or other causes beyond our or our suppliers' control, then we will try to allocate the available quantities and types of Non-Proprietary Products or Proprietary Products on an equitable basis among businesses selling Carvel products. If you do not receive Non-Proprietary Products or Proprietary Products from us, our distributors or our manufacturers because of any of the above reasons, this will not be our breach of the Franchise Agreement, nor will we, our distributors or manufacturers be liable to you for this. (Franchise Agreement, Section 8.1.C.)

5. Share with you our know-how in operating an ice cream store and in manufacturing and selling ice cream and other frozen desserts, and lend you our Standard Operating Procedures Manuals (the "Manuals") containing the information, methods, techniques, and specifications for the operation of a Facility. You must strictly comply with the Manuals in operating your business. We can change the Manuals, and you must comply with these changes when you receive them, but they will not materially alter your rights and obligations under the Franchise Agreement. We may provide to you the Manuals and any supplements to the Manuals in hard copy or electronically via diskette, CD ROM, electronic mail, the Internet or other electronic format. See Item 14, below. We will give you an opportunity to view the Manuals before you purchase a franchise. (Franchise Agreement, Articles 9 and 10).

6. Approve or disapprove all signs, posters, and displays in writing before installation or display. (Franchise Agreement, Sections 7.4 and 12.2)

7. Furnish you with any specifications for required products and services. (Franchise Agreement, Section 8.3)

8. Approve or disapprove any advertising, direct mail, identification, and promotional materials and programs you propose. (Franchise Agreement, Section 12.2)

9. Suggest prices for your services. Any schedule of prices contains only non-mandatory recommendations. You need not accept any of our advice about prices. We do not claim that our suggestions will increase your revenues or profitability. (Franchise Agreement, Section 14.4)

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Carvel Full Store and Carvel Express Store Training & Orientation

Before opening your Store for business, we will train you (if an individual) and your Facility Manager in all aspects of running your Facility, including the manufacture jind sale of parvel products. If you are an individual and will act as the full-time manager of your Store or if this will be your first Store, you and any other persons we designate must attend and successfully complete, to our satisfaction, the initial training program for a Carvel Facility (jtie "Initial Training Program"). If you are an individual but will not act as the full-time manager and you have previously successfully completed our Initial Training Program, or if you are a corporation, partnership, limited liability company, or other entity, your Manager, at least one other [of[your employees and any other persons we designate must attend and successfully complete, to our satisfaction, our Initial Training Program. All training attendees must be over the age of 18

years.

i

You may not attend the Initial Training Program until after your store is under construction and you have provided us with evidence of your properly signed lease and the insurance required under your Franchise Agreement.

The Carvel Full Store Initial Training Program currently lasts 9-12 days and the Carvel Express Store Initial Training Program currently lasts 3 to 7 days. We may reduce or extend the training time if we determine additional time is necessary to satisfactorily train you-or your Facility Manager and other training attendees. We are currently revising our entire training program and reserve the right to extend or reduce applicable required Store training (for any venue) at our discretion. The revised Initial Training Program may include a combination of centralized and decentralized, in-store training at certified training locations. Carvel reserves the right to define certification requirements for certified training stores/trainers based on operational, training and role requirements criteria. We conduct the Carvel Full Store and Carvel Express Store Initial Training Programs about 12 times a year. These programs will be offered more frequently if necessary.

i We also recommend that you attend the opening of someone else's Carvel store before you

open your own Store. We will work with you to facilitate this experience.

The Initial Training Programs for Carvel Full Stores and Carvel Express Stores uses various forms of training tools including use films, slide presentations, lectures, and instruction in ice cream production, pre/post assessments, skills assessments and in-store training. During the training program, we provide you with one copy of our training manuals, which currently consist of a Recipe Manual, Operations Manual and Training Materials Master Manual (dated 2004). On your request, you may view the training manuals before you purchase the franchise Jean Bpland, our Director, Human Resources & Training (see Item 2), supervises the training programs and the training staff. Currently, Carla Russo manages the Carvel training program. Ms. Russo has conducted the training classes since September 2002. Ms. Ftusso has several instnjctors that assist her with the training classes. All instructors must have ;at least 3 years of experience in training in a franchised environment.

Before you open your Carvel Full Store, we will train you according to trje following Initial Training Program schedule. The schedule below outlines training topics, delivered by a centralized format and/or combination of centralized and decentralized formats inside certified training locations throughout the United States.

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The schedule below currently represents a 12 day schedule, however, Carvel reserves the right to modify the schedule, both timing and content, at any time as determined by needs of the business.

&?■>. * ■■- bMiBSsSRf>M
TOPIC	TIME
Welcome Breakfast	8:30-9:00
Pre-Course Test Class Expectations Training Materials	9:00-10:15
Break	10:15-10:30
CEO Address	10:30-11:00
Carvel History	11:00-12:00
Lunch	12:00-1:00
Sanitation and QA	1:00-2:00
Distribute Uniforms/review homework assignment	2:00-2:15
Group Breakouts	2:15-5:00

DAY 2 - CLASSROOM
TOPIC	TIME
Taylor Video	8:00-8:30
Assemble Machines	8:30-9:30
Purchasing & National Accounts	9:30-10:30
Break	10:30-10:45
Budgeting	10:45-11:45
Lunch	11:45-12:45
Group Breakouts*	12:45-4:45
Clean up and Review	4:45-5:30
,_; '--,-: , DAY 3 - CLASSROOM
TOPIC	TIME
Class Picture	8:00-8:15
Marketing Presentation/PR Overview/Ezlink review	8:15-9:00
Local Store Marketing (LSM)	9:00-10:00
Break	10:00-10:15
Customer Service	10:15-11:15
Assemble Machines	11:15-12:00
Lunch	12:00-1:00
Group Breakouts	1:00-5:30
Clean up and Review	5:30-6:30

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1 1 1 1	i
DAY 4 - CLASSROOM
TOPIC	TIME
; Assemble Machines	8:00-8:45
Human Resources (Recruiting, Interviewing, Hiring, Discipline, Scheduling)	8:45-9:45\|
Break	9:45-10:00
i Calculating RPG, overrun, food cost, mix/commisary ratio	10:00-11:30
Lunch	11:30-12:30
Group Breakouts	12:30-5:00
Clean up and Review	5:00-6:00
i	i

DAY 5 - IN-STORE TRAINING	"
TOPIC	TIME :
Work in assigned store Group A, B	10:00-4:00
Training room activities-Group C	10:00-4:00
I
DAY 6 - IN-STORE TRAINING !
TOPIC	TIME
i Group A	10:00-4:00
Group B	OFF
i Group C	10:00-4:00
I i
DAY 7 - IN-STORE TRAINING
I TOPIC	i TIME i
i Group A	OFF ,
Group B	4:00-Close
Group C	OFF
I . . i
DAY 8 - IN-STORE TRAINING
TOPIC	TIME
i Training room activities-Group A	10:00-4:00
i Work in assigned store-Group B	4:00-Close
i : Work in assigned store- Group C	4:00-Close
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	DAY 9 - IN-STORE TRAINING
TOPIC		TIME
Group A and C		4:00-Close
Group B		10:00-4:00

" ' "' * * DAY 10 - IN-STORE TRAINING
TOPIC	TIME
Work in assigned stores-Groups A and C	10:00-4:00
Training room activities-Group B	10:00-4:00

DAY 11-CLASSROOM
TOPIC	TIME
Assmble machines and set up room for social	8:30-9:30
Fountain and cake decorating tests	9:30-10:30
Skills Challenge and review for test	10:30-12:00
Lunch	12:00-1:00
Ice Cream Social for Office staff	1:00-2:00
Ice Cream Social	2:00-3:30
Clean up	3:30-4:30

	DAY 12-CLASSROOM TOPIC
	DAY 12-CLASSROOM TOPIC	TIME
One on One session McDougall	with Richard Key/Jean Boland/Dave	8:15-9:15
Recap and Planning		9:15-9:30
Written Test		9:30-10:30
Graduation Party		11:00

Before you open your Carvel Express Store, we will train you according to the following Initial Training Program schedule. The schedule below outlines training topics delivered by a centralized format and/or combination of centralized and decentralized formats inside certified training locations throughout the United States. In addition, the schedule below currently represents a 3 day schedule, however, Carvel reserves the right to modify the schedule, both timing and content, at any time as determined by needs of the business.

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Day1

Day 2

Day 3

Wednesday

Time	Topic
8:00-9:00	Welcome Breakfast
9:00-10:00	Pre-Test / Training Plan & Expectations
10:00-10:15	Break
10:15-11:15	Carvel History
11:15-11:30	Office Tour
11:30-12:30	Lunch
12:30-1:00	Franchise License Compliance / CFAC Overview
1:00-2:00	Sanitation and QA
2:00-5:00	Group Breakouts: Operations Training
5:00-5:30	Distribute Uniforms / Homework

Thursday

Time	Topic
8:00-8:30	Quiz / Review Agenda
8:30-9:30	Taylor Video / Machine Assembly
9:30-9:45	Break
9:45-11:45	Calculating RPG/Overrun/Food Cost/Other
11:45-12:45	Lunch
1:45-6:00	Group Breakouts: Operations Training
6:00-7:00	Dinner
7:00-9:00	Group Breakouts Recap: Operations Training

Friday

Time	Topic
8:00-8:30	Quiz / Review Agenda
8:30-9:30	Human Resources
9:30-9:45	Assemble Machines/Sanitize
9:45-10:00	Break
10:00-11:00	Purchasing
11:00-12:00	National Accounts

The curriculum of the Initial Training Program for a Carvel Full Store or Carvel Express Store is subject to change. A detailed schedule for your training program will be mailed to you approximately 3 weeks before you arrival to training.

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The Initial Franchise Fee includes the cost of the Initial Training Program for you and your Facility Manager, who must attend the training. You must pay all transportation costs, meals, lodging, and other living expenses for your trainees.

If you or your Facility Manager fail to successfully complete the Initial Training Program for a Carvel Full Store or Carvel Express Store (as applicable), the person who failed can re-enroll in our next scheduled Initial Training Program at no additional charge. We can terminate the Franchise Agreement if the person fails to successfully complete the Initial Training Program again.

If you are a first time Carvel franchisee, you, a partner if you are a partnership, a principal shareholder if you are a corporation, or the managing member if you are a limited liability company, also must attend our New Franchisee Orientation Program ("NFOP") within 90 days after the Effective Date of your Franchise Agreement. All attendees must complete, to our satisfaction, the NFOP before opening your first Facility. At this time, the NFOP consists of a 2 day orientation session conducted in Atlanta, Georgia. We have the right to change the length and content of the NFOP at any time.

Any Facility Managers you appoint after the opening of your Facility must attend and successfully complete our next scheduled applicable Initial Training Program. You must pay their transportation costs, meals, lodging, and other living expenses.

We will not pay compensation for any incidental services your trainees perform during training. We can determine the length and subject-matter of our training programs, and can train any number of individuals from any number of Carvel facilities at the same time.

You may request on-site training at any time. We have no obligation to provide on-site training, and may impose a fee for on-site training. See Item 6.

We may periodically conduct a conference, convention, or training session. We will determine the duration, curriculum, and location of these. You (if an individual), your Facility Manager(s) and supervisory personnel, must attend each conference, convention, or training session. We may charge a fee for these sessions and you must pay all expenses.

Subject to available class space, you may take refresher courses on request. In addition, your operations may warrant our requiring you to undertake remedial training. Lastly, as a condition of renewing your Franchise Agreement, we may require you to undergo further training. In all of these situations, your training program will be conducted at our training center in Atlanta, Georgia, will be tailored to your needs, and will typically last no more than 3 days.

Obligations After Opening - Full Stores and Carvel Express Stores

During the operation of your Facility, we will:

1. Provide assistance and supervision during the initial opening and at the Grand Opening of the Full Store or Carvel Express Store.

2. Make all Non-Proprietary Products and Proprietary Products available to you through independent distributors or manufacturers, unless an act of God, governmental restriction, labor difficulty, or similar event prevents us from doing so. (Franchise Agreement, Sections 8.1 and 8.3)

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3. Furnish you with any specifications for required products and services. (Franchise Agreement, Section 8.3.A)

4. Review and approve or disapprove any advertising, direct mail, identification, and

| promotional materials and programs you propose. (Franchise Agreement, Section 12.2)

I i

5. : Furnish you with those field support services we consider advisable. We may provide

these services on-site, off-site, by telephone, or through other meians. Timing will

depend on the availability of our personnel. (Franchise Agreement, Secjion 14.3)

i

See below in this Item 11 for information on advertising and computer requirements.

Time to Open - Full Store and Carvel Express Store

We estimate that the typical time between signing the Franchise Agreement and opening your Full Store or Carvel Express Store is 3 to 12 months. Factors affecting time include attendance at, and satisfactory completion of, the applicable training program; obtaining the lease; obtaining all necessary permits; completion of construction; and delivery and installation of equipment and supplies. You must (i) obtain our acceptance of the Accepted Location, submit site plans and architectural plans to us, and obtain a lease (including a signed Rider to Lease) within 120 days after we sign the Franchise Agreement, (ii) begin construction at the Acceptec Location within 240 days after we sign the Franchise Agreement, and (iii) open your Facility within 360 days after we sign the Franchise Agreement.

Computer or Cash Register Systems

i

You must provide financial and business records and information to us according to reporting formats, methodologies and time schedules that we establish. As part of these* record keeping requirements, you must install computerized store management systems meeting our standards, as modified in response to business, operations and marketing conditions. You must purchasejan electronic point of sale ("P.O.S. System") cash register system.

The P.O.S. System is an electronic cash register system. Its principal function!; are to manage permanent financial records of sales transactions at your Store, cash control, inventory control, labor scheduling, sales forecasting and menu and price change control, among other things] the types of information that it collects and generates are sales levels by item, itejn menu pricing, product movement statistics, individual unit and category sales data, various financial information to prepare Store reports and time and attendance information for employee payroll calculations. We:will have electronic and manual access to the information that the P.O.S. System generates and there are no contractual limitations on our right to access this information. We¹ have developed interfaces with our sole preferred provider which facilitates this access. You must provide any assistance we require to bring your system on line with our headquarters systejii at the earliest possible time and in the manner we prescribe. You must accurately, consistently and completely

record, structure, capture and provide all required information through your computerized of sale system.

point

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Our current minimum specifications for the P.O.S. System are as follows: (Note that the system prescribed by our sole preferred provider meets all of these specifications)

1. The P.O.S. System must provide for individual registers with non-resettable sales totals.

2. The P.O.S. System must provide for individual register reporting and consolidated reporting from all registers in the Store.

3. The P.O.S. System must provide a number of financial reports including sales per hour, deposits, daily sales, sales adjustments, and detailed cashier activity reports. These reports are currently available from our sole preferred provider

4. The P.O.S. System must include all functions necessary to track inventory.

5. The P.O.S. System must be modular to prevent any single failure from damaging or deleting system data and to ensure capability for additional features.

6. We require consistent characters in the menu description so that cashiers, customers and others reading the information can identify and understand the items. Therefore, the P.O.S. System must provide for a specific menu description we provide. We will provide the management and download of retail and menu items only to our sole preferred vendor's solution to facilitate this.

7. The P.O.S. System must provide preset discount keys for employee meals, senior citizen, police, and mall employee discounts, etc.

8. The P.O.S. System must be able to communicate with a personal computer and our above-store portal through built-in features. This functionality is currently available with our sole preferred partner.

9. The P.O.S. System must have an order error correction and/or void item function.

10. The P.O.S. System must have a manager key or code security.

11. The P.O.S. System must have a manager delete order function.

12. The P.O.S. System must have a customer display showing at least the order dollar total.

13. The P.O.S. System must have a receipt printer.

14. The P.O.S. System must have suspense file capability. This function allows new menu items to be set-up in the system before they actually go in effect.

15. The P.O.S. System must have un-interruptible power, which allows for system operation without main power for a minimum of 30 minutes ensuring that sales backup has taken place.

16. The P.O.S. System must provide a means of auditing previous transactions.

17. The P.O.S. System must have some way of allowing employees to log-in and out, either by built-in programs or attachment of an external time clock.

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As of February 1, 2006, we have designated Radiant Systems as our sole preferred provider for our designated point-of-sale ("POS") system. Radiant Systems is located dt 3925 Brookside Parkway, Alpharetta, Georgia 30022 USA and may be reached by telephone ;at 800-229J-0991. We have designated two separate POS systems from which you may choose that meet all criteria outlined above. Our specified hardware and software components are.as follows: ;

Carvel

POS

Package

Carvel

POS

Package

Function

Description

Quantity

POS Hardware

P1210 includes 2x20 customer display, XPe

Uninterruptible power supply

APC UPS 350 for POS (1 for every 2 POS)

Cash drawer

Radiant 16" Cash Drawer w/ brkt and insert

Receipt printer

Epson TM88 Black thermal receipt printer

PC

Back Office Server Kit

Uninterruptible power supply

APC UPS 420 for Back Office Computer

Anti-virus

Norton Antivirus Software

Remote support

PC Anywhere Software

Network switch

8 Port Switch

Support modem

External Modem 56K

Printer cable

Serial Printer Cable 6' DB25M-DB9F

Swipe cards

Employee White Mag Stripe Cards

10

Accessories

Install Kit Keyboard

(Required) - Includes USB

POS Software

QSR POS Software - per terminal

Credit software

Credit/Cashless Payment Software - per terminal

Inventory SW

Quick Count Software

Configuration SW

Centralized Database Manager - Provided at no cost with purchase of Aloha Enterprise Software____________________

1

While we are not contractually required to provide to you ongoing maintenance,, repairs, upgrades or updates, Radiant Systems has the contractual right to provide ongoing maintenance, repairs, upgrades and updates. The current annual cost of optional or required maintenance and support is as. follows:

Software Support Fees: $696.00 per Store per year for the software portion ohly of each "Carvel Software & Equipment Packages".

of the

Software Maintenance Fees: Annual software maintenance fees will be $166.00 per Store for the software portion only of each of the "Carvel 1 POS Packages", and $300.00 per Store for each of the "Carvel 2 POS Packages". i

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Equipment Maintenance Services:

Year 1: Included

Year 2+: "Carvel 1 POS Packages" - Includes Advanced Exchange Depot (AED) on the

entire package and 7x9 Part & Tech on the Back Office Computer - $406.00 per Store (US only) per year

"Carvel 2 POS Packages" - Includes Advanced Exchange Depot (AED) on the entire package and 7x9 Part & Tech on the Back Office Computer - $566.00 per Store (US only) per year

We may revise our specifications for the P.O.S. System from time to time. You are contractually required to make periodic upgrades and updates to the P.O.S. System and there are no contractual limitations on the frequency and cost of this requirement. If we notify you that we have determined to substitute one or more other programs for our then-currently designated point of sale software program, then you must stop using the old program, purchase the new program, sign any required software license agreement and any required maintenance/update agreement with the publisher or vendor, and use the new software program. Currently all of our programs are provided by our sole preferred provider. You must keep your system in good maintenance and repair. We can require you to add, substitute or replace computer hardware, memory, ports, accessories, peripheral equipment, or software, or to replace your entire system. There are no contractual limitations on the frequency or cost of your obligation to upgrade and replace hardware and software for your P.O.S. System.

We can also require you to purchase a computer system including hardware, software, communications equipment, telephone lines and other equipment. This system is included in the cost of the above configuration from our sole preferred provider.

During 2006, we also plan to begin collecting amounts you owe us through an electronic funds transfer system. Your payments to us will be effectuated by a payment system by the use of pre-authorized transfers from your operating account through the use of special checks or electronic funds transfer that we will process at the time any payment is due, including the Continuing Royalty and the Advertising Contribution.

If we notify you that we have determined to substitute one or more other programs for our then-currently designated point of sale software program, then you must stop using the old program, purchase the new program, sign any required software license agreement and any required maintenance/update agreement with the publisher or vendor, and use the new software program. You must keep your system in good maintenance and repair. Carvel can require you to add, substitute or replace computer hardware, memory, ports, accessories, peripheral equipment, or software, or to replace your entire system. There are no contractual limitations on the frequency or cost of your obligation to upgrade and replace hardware and software for your computerized point of sale system.

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Advertising

You must contribute to our cost of advertising and promotions. See Item 6. We can spend his money in any manner we choose to promote the Carvel brand and products. We intend our advertising and promotional activities to further general public recognition and acceptance of the proprietary Marks for the benefit of the Carvel System. We have no obligation to make expenditures that are equivalent or proportionate to your contributions, to ensure that you benefit directly or proportionately from the placement of advertising, or to ensure that any advertising impacts or penetrates your area. We need not maintain the advertising contributions you paid or income earned from these advertising contributions in a separate account from our other money. We are not a fiduciary for your advertising contributions, and the aggregate of

led an

franchisee advertising contributions is not a trust or an "advertising fund." You ere not enti to an accounting of our expenditures (but we will provide Maryland franchisees with accounting of our expenditures within a reasonable time after we receive their y/ritten request for the accounting). In fiscal year 2005, we incurred $5,501,056 in advertising, marketing, and promotional expenses for goods, services, and media space that benefited the Carvel System. Of these expenses, we incurred about 58.2% for media placement; 11.1% for marketing general and administrative expenses; 25.5% for media production; 4.7% for agency fees; 0.5%jfor iiarket research; and 0% for solicitation of franchise sales. We billed franchisees! $4,801,056 in advertising contributions during the same period (the advertising contributions that we actually collected were less because of some franchisee delinquency). Any amounts collected but not spent within the fiscal year are carried over and spent in the next fiscal year. j

f your Facility will be a Carvel Full Store, you must spend at least $5,000 in cirand opening advertising promoting the opening of your Facility (the "Grand Opening Obligation") within 30 days before or 60 days after the date you open the Facility. In addition, you also oust spend an additional $15,000 in local store marketing for your Facility during the first 12 months after the Opening Date. All materials you use for this Grand Opening Obligation and first yoar marketing', ;a'nd the media in which you use them, are subject to our approval. !

We will direct all advertising programs and control the creative concepts, materials and media used, media placement, and allocation. The advertising contributions may be ussd to meet all costs of administering, directing, preparing, placing, and paying for national, regional, or local advertising. This includes the cost of preparing and conducting television, radio, rnagazine, and newspaper advertising campaigns, and other public relations activities and the cost of employing advertising agencies, including fees to have print or broadcast advertising placed by an agency and all other advertising agency fees. We can spend your advertisinc contributions for our reasonable administrative costs and overhead that we incur in activities reasonably related to the administration or direction of advertising and promotional programs and new product development and research, including conducting market research; preparing marketing and advertising materials; working with public relations firms, advertising agencies, advertising placement services, and creative talent; preparing and maintaining, and paying third parties jfor the preparation and maintenance of, World Wide Web pages and sites; other activjties related to advertising and promotion on the internet and other public computer networks; fand collect ng and accounting for franchisee advertising contributions. '

Carvel currently advertises using print, radio, and television advertising, with local and regional coverage. Carvel currently employs both an in-house advertising department and national or regional advertising agencies. You may develop local advertising materials for your own use, at your own cost. We must approve these materials before you use them.

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There is no advertising fund. There is no advertising council or regional advertising cooperative. We have no power to require advertising cooperatives to be formed, changed, dissolved, or merged.

ITEM 12 TERRITORY

The Franchise Agreement does not give you any territorial rights or protections in any geographic area. The Franchise Agreement licenses you to manufacture and sell Carvel products at retail only from a specific Full Store or Carvel Express Store location that we accept (the "Facility Location"). We do not grant you any exclusive territory or other territorial rights under these agreements other than the right to sell Carvel products at retail from the Facility.

There may already be company-owned or franchised Carvel Facilities near your Facility that will continue to operate. We may open or franchise new Carvel Facilities near your Facility without consulting you or giving you the first right to open them. These Facilities may compete directly with you.

While we do not intend to open any new traditional, company-owned Carvel Facilities during 2005, we do intend to expand our sales to supermarkets, convenience stores and other retail outlets and to grow our non-traditional foodservice business, including installing company-owned or operated or third party owned or operated satellite operations in locations like turnpike rest stops, stadiums, university cafeterias, parks, and beaches, and engaging in various co-branded and store-within-a-store concepts, through mail order and the internet. These sales may compete with your location.

Other Carvel Facilities near your Facility that are already in existence or opened later under Franchise Agreements may also compete directly with you and possibly adversely affect the operation of your Facility.

We and our affiliates have the right:

To own and operate, and to grant franchises for Facilities at any location, including close to your Full Store or Carvel Express Store.

To offer and sell from these Facilities, (or any other channels of distribution) products and services identical to those you will be selling, and to exploit the Proprietary Marks, name, reputation, trade secrets, and know-how in and with these sales. These other channels of distribution may include (for example) sales to and through supermarkets; convenience stores; club stores; other retail stores; restaurant chains; beach resorts; park facilities; theater chains; federal, state and local governmental or quasi-governmental agencies; affiliated colleges and universities (including state university branches); the military; stadiums; airports; through mail order; and the internet.

To offer and sell Carvel products and services to any customer anywhere, including foodservice accounts and non-franchised venues.

To advertise and promote company-owned and franchised Facilities to individuals and entities regardless of their geographic location.

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To purchase, merge, acquire, or affiliate with an existing ice cream store chain, restaurant chain, or any other business regardless of the location of its facilities, and to operate, franchise, or license these facilities under the Proprietary Marks or any other marks after our purchase, merger, acquisition, or affiliation, regardless of the location of these facilities, including close to your Facility.

Continue to permit those franchisees previously authorized under our Supermarket Route Program to sell Carvel products to supermarkets, convenience stores, club stores, and other . retail outlets. These sales may compete with your location.

As of the effective date of this Offering Circular, we have no plans to franchise or operate i any business similar to that of a Carvel Facility under different trademarks. We also have no pjans tosefl or lease similar products or services through other channels of distribution under different trademarks. We do intend to use our current supermarket distribution system to distribute products of other manufacturers to supermarkets, convenience stores, club'stores and other retail outlets. ' !

; . I

If the market for your location declines dramatically over the years, we may request that you relocate your Facility. You are not obligated to relocate your Facility if we request you to. If we request that you relocate and you agree and relocate to a site we accept whils your Franchise Agreement is still in effect, then you must sign our then-current Franchise Agreement and your present 'Franchise Agreement will terminate. The Franchise Agreement you sign will expire on the same date as the expiration date of your new lease and, if that date falls Vvithin the term of your present Franchise Agreement, you will not pay another Initial Franchise Fee, and [the Royalty and Advertising Contribution will remain the same as in your present Franchise Agreement, unless the relocated facility is in a different type of location (i.e., chjange from a mall location to a street-side location, in which case the Advertising Contribution will be that then charged for the type of venue of the relocated facility. If the expiration date of your new lease falls after the expiration date of your present Franchise Agreement, then you must pay an Initial Franchise Fee of $1,000 multiplied by the number of years between the expiration date of the present term and the expiration date of the new term; and after the expiration date of your present Franchise Agreement, the Continuing Royalty and System Advertising^! Contribution will be changed to that stated in our then-current Franchise Agreement.

ITEM 13 TRADEMARKS

The principal Carvel commercial symbol that we will license to you appears on the cover of this Offering Circular. The following is a description of the principal trademarks and service marks that we will license to you.

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FEDERAL REGISTRATIONS

Mark	Registration Number	Registration Date	Principal or Supplemental Register
Carvel and Design	716,227	May 30, 1961	Principal
Carvel and Design	2,510,924	November 20, 2001	Principal
Carvel and Design	2,510,923	November 20, 2001	Principal

"Proprietary Marks" means our symbols, trademarks, service marks, logotypes, and trade names. We also have registered other Proprietary Marks with the United States Patent and Trademark Office ("USPTO"). The other Proprietary Marks that we currently use are listed in the Manuals. We update the Manuals periodically, and add or delete Proprietary Marks on a continuing basis. All required affidavits of use have been filed for the Proprietary Marks listed above and the registration for 716,227 has become incontestable.

Your rights to the Proprietary Marks are derived solely from your Franchise Agreement. You will use only the Proprietary Marks to identify your Facility except as we authorize. You have no right to apply for registration of any Proprietary Mark. In using the Proprietary Marks, you must strictly follow our standards, specifications, requirements, and instructions. All goodwill associated with the Proprietary Marks will remain our exclusive property. You may not use the Proprietary Marks with any unauthorized product or service or in any other way not explicitly authorized by the Franchise Agreement or that we otherwise approve. When your Franchise Agreement expires or terminates, all rights to use the Proprietary Marks will revert to us automatically without payment to you and you will keep no rights in the Proprietary Marks. You may not take any action to question or contest our rights or interest in the Proprietary Marks and the goodwill related to the Proprietary Marks.

There are presently no effective determinations of the USPTO, any trademark trial and appeal board, the Trademark Administrator of any state or any court, any pending interference, opposition, or cancellation proceeding, or any pending material litigation involving any of the Proprietary Marks that is relevant to your use. There are no agreements that significantly limit our rights to use or franchise the Proprietary Marks in any way that is material to you.

If you learn of any claim against you for alleged infringement, unfair competition, or similar claims about the Proprietary Marks, you must promptly notify us. We will promptly take the action we consider necessary to defend you. We must indemnify you for any action against you by a third party based solely on alleged infringement, unfair competition, or similar claims about the Proprietary Marks. You may not settle or compromise any of these claims without our written consent. We have the right to defend and settle any claim at our sole expense, using our own counsel. You must cooperate with us in the defense. We will have no obligation to defend or indemnify you if the claim against you relates to your use of the Proprietary Marks in violation of the Franchise Agreement.

You must comply with our instructions to modify or discontinue use of any Proprietary Mark or to adopt or use additional or substituted Proprietary Marks. We will not be liable to you for any resulting expenses. You promise in the Franchise Agreement not to start or join any proceeding against us for any resulting expenses.

There are presently no infringing uses known to us that could materially affect your use of our Proprietary Marks in the state in which your Facility will be located.

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ITEM 14 PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION

Carvel has no patents material to the franchise. We claim copyrights o;n certain forms, advertisements, promotional materials, and other written materials, and in some instances!we have obtained federal copyright registrations for some of these materials., We also | claim copyrights and other proprietary rights in our Manuals (and the modifications we make to it periodically). We also claim copyrights in our building designs. We will lend you a copy of pur Manuals.

There are no agreements currently in effect that significantly limit your right to use any of bur copyrights. Also, there are no currently-effective determinations of the USPTO.j Copyright Office (Library of Congress) or any court involving any of our copyrights discussed labove. We are unaware of any infringing uses of or superior prior rights to any of our copyrights that could materially affect your use of them in the state in which your Facility will be located.

i - i

YoUr obligations and ours to protect your rights to use our copyrights are the same as the obligations for Proprietary Marks described in Item 13.

Confidential Information

You may never, during the Initial Term, any Renewal Term, or after the Franchise Agreement expires or is terminated, reveal any of our confidential information to another person or use it!for any other person or business. You may not copy any of our confidential information or give it to a third party except as we authorize. All persons affiliated with you must sign our iPersqnal Covenants Agreement (Schedule C to the Franchise Agreement). j

Our confidential information includes products, services, equipment, technologies, and procedures for the retail sale of ice cream and other frozen desserts; systems, and techniques for the production, distribution, merchandising, and sale of Carvel ice cream, frozen desserts, and related products and services; systems and techniques for food preparation and storage; menus; recipes and ingredients; special techniques for packaging, display, merchandising, and marketing of food products; operating procedures for sanitation and maintenance; systems of operation, services, programs, products, procedures,. policies, standards, techniques, requirements, and specifications that are part of the Carvel System; the Manuals; methods of advertising and promotion; instructional materials; and other matters.

You must irrevocably license to us all products, services, equipment, and programs you develop relating to ice cream, frozen dessert, and other food and non-food products! We will not j be liable to you in any way because of this license.

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ITEM 15

OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS

Full Stores and Carvel Express Stores

You must personally supervise the full time operation of the Facility, unless we otherwise permit in writing. You must devote full time and your best efforts for the proper and effective operation of the Facility. If we license you to operate more than one Carvel Facility, you must devote your full time efforts for the proper and effective operation of all your Facilities. You must employ one Facility Manager for each Full Store and Carvel Express Store.

If you are an individual, you must be the Facility Manager. An entity franchisee must designate a Facility Manager. The Facility Manager, who will have day-to-day management responsibility for your Carvel Facility, will exercise on-premises supervision and personally participate in the direct operation of the Facility. The duties and hours of the Facility Manager are in our Manuals. You must inform us in writing of your Facility Managers and any successors. We must approve your Facility Managers. Your Facility Managers must complete the Initial Training Program to our satisfaction. After a Facility Manager's death, disability, or termination of employment, you must immediately notify us, and you must designate a successor or acting Facility Manager within 30 days. If you fail to do so and do not cure, we can terminate the Franchise Agreement.

If you are a business entity, the Facility Manager need not have any equity interest in you. We do not recommend investment in a Carvel Facility for investors interested in an absentee management business.

All persons affiliated with you must sign our Personal Covenants Agreement (Schedule C to the Franchise Agreement and keep our confidential or proprietary information confidential (see Item 14).

ITEM 16 RESTRICTIONS ON WHAT YOU MAY SELL

You must offer and sell all services, products, and programs that we require you to sell and that are part of the Carvel System, or that we incorporate into the Carvel System in the future. We may add to, delete from, or modify the services, products, and programs that you can and must offer. You must abide by any additions, deletions, and modifications, but only if the changes do not materially and unreasonably increase your obligations under the Franchise Agreement.

You may not sell any menu item, product, service, or program that is not a part of the Carvel System without our prior written approval. You may not use the Carvel name or Proprietary Marks for any other business. You may not conduct any business other than the business contemplated by the Franchise Agreement from your Facility without first obtaining our written consent.

You may only sell Carvel products and services at retail from your Facility, and you may not engage in the wholesale sale or distribution of any Carvel product, service, equipment, or other component, or any related product or service, without first obtaining our written consent. You may not sell Products thru the Internet or using any channel of distribution other than your Facility without first obtaining our written consent.

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You may not sell, barter, or exchange the Carvel Mix or other proprietary iterns at wholesale or retail under any condition. If you engage in any wholesale or retail sale, barter, or exchange of any quantity of Carvel Mix or other proprietary items to another Carvel franchisee or to any other person; or entity, we can terminate the Franchise Agreement immediately on notice to you. i

In preparing, dispensing, and selling Carvel products, you may use only product components, ingredients, flavoring, and garnishes that meet our then-current requirements land specifications. You must prepare all Carvel products in strict accordance with our standards, specifications, techniques and procedures. In dispensing the Carvel products, you may use only containers, cartons, bags, boxes, napkins, and other paper goods and packaging bearing¹ our then-currently approved text and designs, and that otherwise meet our then-curront requirements, specifications, and quality standards. i

ITEM 17

RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION

i THIS TABLE LISTS CERTAIN IMPORTANT PROVISIONS OF THE FRANCHISE AND

RELATED AGREEMENTS ON RENEWAL, TERMINATION, TRANSFER, AND DISPUTE

RESOLUTION. YOU SHOULD READ THESE PROVISIONS IN THE AGREEMENTS

AjTTACHED TO THIS OFFERING CIRCULAR.

i i

We use the same franchise agreement for Full Stores and Carvel Express Stores,

therefore these references apply to both offerings.

Provisions

Section in Franchise Agreement

Summary

Term of the franchise

Section 3.1

20 years

20 years if you comply with our renewal requirements

Renewal or extension of the term

Section 3.2

Requirements for you to renew or extend

Section 3.2

a. Timely request renewal. '

b. Complete renewal application. i

c. Have been in substantial compliance with franchise Agreement.

d. Remodel, refurbish and renovate the Facility.

e. Sign and return your Renewal Franchise Agreement.

f. Sign up for our Carvel Savings Plan. ₍

g. Pay our then-current initial franchise fee. , h. Sign a general release._______________,_________

Termination by you

Section 20.1

None.

Termination by us without cause

None

None.

Termination by us with cause

Article 20

We may terminate only if you default.

"Cause" defined - defaults that can be cured

Section 20.3

You have 10 days to cure if you:

a. Fail to pay any of your debts to us, our affiliates or others

b. Default under your lease or lose possessic n of the Accepted Location.

c.Grossly mismanage the Facility. d. Breach any other provision of your Franchise Agreement,

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Provisions	Section in Franchise Agreement	Summary
h. "Cause" defined - defaults that cannot be cured	Section 20.2	On notice to you: a. A threat or danger to public health or safety results from your continued operation of the Facility. b. Any dilution or adulteration of products at the Facility, or any misrepresentation, substitution, or palming off of non-Carvel products from the Facility operated under the Franchise Agreement. c. You sell, barter, or exchange the Carvel Mix or other proprietary items at wholesale or retail. d. You fail to comply with the in-term covenant not to compete, violate restrictions on use of Confidential Information, or fail to obtain the required additional covenants. e. You copy or permit anyone else to copy any part of the Manuals. f. You (or any principal of a corporation, partnership, or proprietorship franchisee) are convicted of a felony, fraud, etc. g. You do not maintain the required financial records. h. You refuse us permission to inspect or audit. i. You fail to secure a Facility Location within the required time limits and procedures or fail to open on time. j. After curing a default, you commit the same or similar default again within 12 months. k. You become insolvent, become subject to bankruptcy, make an assignment for creditors, subject to a receiver, have unpaid judgments, subject to attachment proceedings or execution of levy, or un-dismissed foreclosure. I. You have an uncured default in any other agreement, including a mortgage or lease for the Facility.
i. Your obligations on termination/nonrenewal	Article 21	a. Stop using our Proprietary Marks, Confidential Information, trade secrets, and Manuals. b. Immediately deliver to us all molds related to the System and the Manuals. c. Immediately cancel all assumed name registrations. d. Within 5 days, pay all sums owing to us and our affiliates. e. Immediately de-identify the Facility as our franchisee or former franchisee. f. Immediately comply with non-competition covenants in the Franchise Agreement. g. Stop using the telephone numbers listed in directories under the name "Carvel" or any confusingly similar name. h. Immediately sign agreements necessary for termination. i. Pay all liquidated damages due us. j. If we choose not to take over (or to have another franchisee take over) the Facility, redecorate and remodel it to distinguish it from a Carvel Facility. k. In 15 days, arrange with us for an inventory by us, at our cost, of personal property, fixtures, equipment, inventory and supplies. We will have the option for 30 days after termination or expiration to buy these at the lower of depreciated book value or fair market value. If we terminate for cause, we can take possession of the Facility and require that you assign to us or our designee your interest in the lease for the Facility. If you dispute the termination, then we can operate the business until final court determination. If the court decides termination was invalid, we must make a complete accounting for the period when we operated the business.
j. Our Transfer	Section 19.5	We can assign if the assignee is capable of performing our obligations under the Franchise Agreement, and agrees to perform these obligations.

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	■		<	i i i
	i , Provisions	Section in Franchise Agreement	Summary
k.	Your Transfer" definition	Section 19.1	Any assignment, subfranchising, sublicensing, sale, transfer or share of: (i) your rights under or interest in the Franchise Agreement; (ii) the Facility or any interest in it; (iii) the Franchisee, if an entity; (iv) any interest in a Franchisee entity; or (v) any interest in any entity that directly or indirectly controls a Franchisee entity.
1.	Our approval of your transfer	Section 19.3	Neither you nor other owners of the interests described in k. above can transfer without first obtaining our written approval.
m.	Conditions for our approval of transfer i i 1 ^! 1 j i ¹ i	Section 19.3	a. You must pay all amounts you owe us and bur affiliates. ' b. You have not been in default under the Franchise Agreement or any other agreement during the Term. i c. Transferee and proposed Facility Manager must attend and^:successfully complete training before transfer, at transferee's expense. d. Transferee must meet our then-current requirements for new franchisees. \| e. Transferee agrees to upgrade Facility to conform to then-current standards. f. Transferee must sign our then-current Franchise Agreement, The term of new Franchise Agreement will expire on the date of expiration of the Franchise Agreement. g. You must sign a general release. i h. You must give us a copy of the signed assignment contract. \| i. You pay us a transfer fee. ! ■ j. You must comply with our right of first refusal. [
n.	j Our right of first refusal to purchase your business i	Section 19.4	We can match any offer for your Franchise Agreement; your Facility; the Franchisee, if an entity; any interest in a Franchisee entity; or any interest in an entity controlling a Franchisee entity. i
0.	;Our option to purchase your ■ business	Section 21.3C.	We may purchase your personal property, fixtures, equipment, i inventory, and supplies related to the Facility a': the lesser of , depreciated book value or fair market value.
P-	Youndeath or disability 1 I 1 i i 1 !	Section 19.2	On your death or permanent incapacity your rights pass to your "Estate." Your Estate may continue operating the Facility if if: provides an acceptable Facility Manager. Your Estate must transfer your right to a buyer that we approve, who must successfully complete our Initial Training Program and assume full-time operation of the franchise within one year of your death or disability.
q-	Non-competition covenants [during the term of the franchise	Article 18	No involvement in competing business anywhere.
r.	Non-competition covenants after the franchise is terminated or expires	Section 18.4.B.	No involvement in competing business for 2 years within 3-rr of Facility or any other Carvel Facility. i	lileradius i I
s.	Modification of the agreement	Sections 10.2 and 25.2	No oral modifications, but we can change the Manuals. Any Manuals change will not unreasonably increase your obligations in the Franchise Agreement. !
t.	integration/merger clause i i :	Section 25.2	Only the terms of the Franchise Agreement and related agre binding (subject to state law). Any other promises may not b enforceable.	ements are i
u.	Dispute resolution by arbitration or mediation	Section 22.1	Most disputes must be resolved by arbitration. '	i
v.	Choice of forum*	Section 22.1	Currently, arbitration or lawsuit must be in Georqia.
w.	Choice of law*	Section 25.4	Georgia law applies. ! j
	i ,Carvel-UFOC-040106-v1		UFOC Page 41 i	i

These states have laws that may supersede the Franchise Agreement and other agreements in your relationship with us, including the areas of termination and renewal of your franchise: ARKANSAS [Stat. Sections 4-72-201 to 4-72-210], CALIFORNIA [Bus. & Prof. Code Sections 20000-20043], CONNECTICUT [Gen. Stat. Section 42-133e et seq.], DELAWARE [Code, Tit. 6, Ch. 25, Sections 2551 etseq.], HAWAII [Rev. Stat. Section 482E-1], ILLINOIS [815 ILCS 705/1 TO 705/44], INDIANA [Stat. Section 23-2-2.7], IOWA [Code Sections 523H.1-523H.17], MARYLAND [Stat. Sections 11-1301 to 11-1307]; MICHIGAN [Stat. Section 19.854(27)], MINNESOTA [Stat. Section 80C.14], MISSISSIPPI [Code Sections 75-24-51 to 75-24-61], MISSOURI [Stat. Section 407.400 - 407.410 and 407.420], NEBRASKA [Rev. Stat. Section 87-401 to 87-410], NEW JERSEY [Stat. Section 56:10-1 to 56:10-12], SOUTH DAKOTA [Codified Laws Section 37-5A-51], VIRGINIA [Code 13.01-557-574-13.01-564], WASHINGTON [Code Section 19.100.180, 19.100.190] and WISCONSIN [Stat. Section 135.01 - 135.07].

A provision of a Franchise Agreement that terminates the Franchise Agreement if you seek relief granted by the Bankruptcy Code may not be enforceable under federal bankruptcy law (11 U.S.C. Sec 101 etseq.).

Some states, including California [Bus. and Prof. Code Sections 20000-20043], provide that if the Franchise Agreement contains a provision that is inconsistent with state law, the state law will control.

* APPLICABLE STATE LAW MAY REQUIRE ADDITIONAL DISCLOSURES ON THE INFORMATION IN THIS OFFERING CIRCULAR. THESE ADDITIONAL DISCLOSURES APPEAR IN EXHIBIT H.

ITEM 18 PUBLIC FIGURES

We do not use any public figure to promote our franchises.

ITEM 19 EARNINGS CLAIMS

We do not furnish, or authorize our salespersons or anyone else to furnish, any oral or written information on the actual or potential sales, costs, income, or profits of a Carvel Full Store or Carvel Express Store. Actual results vary from unit to unit and we cannot estimate the results of any particular franchisee.

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ITEM 20 OUTLETS

FRANCHISED BUSINESS STATUS SUMMARY FOR YEARS 2005/2004/2003*

State	Transferred	Canceled or Terminated	Not Renewed	Reacquired by Franchisor	Left the System (Other)	Total from i Left Columns	Franchises ^!Operating at. Year End
Arizona	0/0/0	2/0/0	0/0/0	0/0/0	0/0/0	2/0/0	7/B/5
California	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	14/2/0 '
Connecticut	0/2/0	1/2/0	1/1/2	0/0/0	0/0/1	2/4/2 I	27/29/30 ;
Florida	1/2/0	0/1/0	0/1/3	0/0/0	0/0/0	1/4/3	42/32/29 >
Georgia	1/0/0	2/0/0	0/0/0	0/0/0	0/0/0	3/0/0 '	11/8/2
Illinois	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	1/1/0
Kentucky	0/0/0	1/1/0	0/0/0	0/0/0	0/0/0	1/1/0	0/1/1
Maryland	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	7/2/1
Massachusetts	0/0/1	1/0/0	1/0/0	0/0/0	0/0/0	2/0/1	3/5/5
Michigan	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0 ,	5/1/0
Missouri	0/0/0	1/0/0	0/0/0	0/0/0	0/0/0	1/0/0	0/1/0
Nevada	1/0/0	0/0/0	0/0/0	0/0/0	0/0/0	1/0/0	4/3/0
New Hampshire	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	1/1/1
New Jersey	3/2/2	0/3/1	1/2/1	0/0/0	0/0/1	4/7/4 ,	57/53/54
New York	21/13/20	17/10/4	1/5/4	0/0/0	0/0/2	39/28/31	204/218/217 !
North Carolina	2/1/1	2/0/0	0/0/0	0/0/0	0/0/0	4/1/1 i	11/11/6
Ohio	0/0/0	2/0/0	0/0/0	0/0/0	0/0/0	2/0/0	4/3/0
Pennsylvania	0/0/0	0/0/0	0/0/0	0/0/0	0/0/1	0/1/2	13/8/7
Rhode Island	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	3/3/3
South Carolina	0/0/0	3/0/0	0/0/0	0/0/0	0/0/0	3/0/0	1/4/3
Texas	0/1/0	2/0/0	0/0/0	0/0/0	0/0/0	2/1/0	13/7/10
Vermont	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	1/1/1
Virginia	0/0/0	0/0/0	0/0/1	0/0/0	0/0/0	0/0/1	5/2/1
West Virginia	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	0/0/0	1/0/0

" All numbers are as of December 31 for each year. The numbers in the Total coluriin may exceed the number of businesses affected because several events may have affected the same business.; For example, the same business may have had multiple owners.

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State

Transferred

Canceled or Terminated

Not Renewed

Reacquired

by Franchisor

Left the System (Other)

Total from

Left Columns

Franchises

Operating at

Year End

TOTALS:

29/21/24

34/17/5

4/8/10

0/0/0

0/0/2

67/46/44

435/404/367

**

STATUS OF COMPANY-OWNED BUSINESSES FOR YEARS 2005/2004/2003

State	Businesses Closed During Year	Businesses Opened During Year	Total Businesses Operating at Year End
All States	0/0/0	0/0/0	0/0/0
TOTALS:	0/0/0	0/0/0	0/0/0

PROJECTED STORE OPENINGS AND FRANCHISE SALES

State	Franchise Agreements Signed But Store Not Opened As Of 12/31/05	Projected Franchised New Stores Sold In The Next Fiscal Year	Projected New Company Stores In The Next Fiscal Year
Alabama	1	0	0
Arizona	3	1	0
California	23	15	0
Connecticut	2	5	0
District Of Columbia	1	0	0
Florida	28	15	0
Georgia	8	2	0
Illinois	1	0	0
Maryland	2	2	0
Michigan	8	1	0
Missouri	1	0	0
Nevada	6	3	0
New Hampshire	2	0	0
New Jersey	10	10	0
New York	15	10	0
North Carolina	7	1	0

All numbers are as of December 31 for each year.1

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State	Franchise Agreements Signed But Store Not Opened As Of 12/31/05	Projected Franchised New Stores Sold In The Next Fiscal Year	I Projected New' Company Si ores In The ' Next Fiscal Year ; i i
Ohio	1	1	0	;
Pennsylvania	1	2	; o	;
South Carolina	6	0	0	i
Tennessee	1	1	: o	i
Texas	13	5	1 0 < i
Utah	1	0	0	¹
Virginia	10	3	0	i
Totals	151	77	. 0	j

We do not intend to open any new traditional, company-owned Carvel retail .stores during) the foreseeable future. We do intend to expand our sales to supermarkets, convenience stores 'and other retail outlets and to grow our non-traditional foodservice business, including installing company-owned or operated or third party owned or operated satellite operations in locations like turnpike rest stops, university cafeterias, parks, stadiums, beaches, and large shopping venues/and engaging in various co-branded and store-within-a-store conceptsand through mail order and the internet. ;

Exhibit D shows the name, address, and telephone number of the franchised Facilities as of December 31,2005. ' \

¹ ' i

Exhibit E shows, as of December 31, 2005, the name, last-known home address and telephone number of each franchisee whose franchise was terminated, canceled, or not renewed; who voluntarily or involuntarily ceased to do business under a franchise agreement during .the applicable fiscal year; or those franchises who did not communicate with us within 10 weeks of the date of this Offering Circular.

ITEM 21

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FINANCIAL STATEMENTS j

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The audited consolidated financial statements of Focus Brands Inc. (formerly known as Caijvel Holding Corporation) and subsidiaries (our parent company) for the fiscal years ended December 31, 2005, 2004, and 2003, including consolidated balance sheets ,3s of December 31, 2005 and 2004, and consolidated statements of operations, changes in stockholder's equity (deficit), and cash flows for the 3 fiscal years ending December 31, 2005, 2004, and 2003, are in Exhibit A. Focus Brands Inc.'s absolute and unconditional guarantee of Carvel Corporation's performance of its obligations under the franchise agreement is included in Exhibit A.

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ITEM 22 CONTRACTS

The following contracts and related documents are attached to this Offering Circular:

EXHIBIT B CARVEL FRANCHISE AGREEMENT AND RELATED AGREEMENTS:

Schedule A Schedule of Events

Schedule B - Rider to Lease

Schedule C - Personal Covenants

Schedule D - Guaranty of Payment and Performance

Schedule E State Law Addendum (If Required)

EXHIBIT C OTHER AGREEMENTS

ITEM 23 RECEIPT

Two copies of an acknowledgment of your receipt of this Offering Circular appear as Exhibit I. Please return one copy to us and retain the other for your records.

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EXHIBIT A FINANCIAL STATEMENTS

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