What actions can Afuri Ramen Dumpling take if a franchisee violates another agreement with them?
Afuri_Ramen_Dumpling Franchise · 2024 FDDAnswer from 2024 FDD Document
Accordingly, in the event that Franchisee terminates this Agreement other than in accordance with the terms of Section 6.2, or if Afuri terminates this Agreement pursuant to its terms, then Franchisee shall pay to Afuri within thirty (30) days of such termination as liquidated damages (and not as a penalty), an amount equal to the Royalty Fees you should have paid had this Agreement not been terminated, for the lesser of (1) 24 months, or (2) the number of months remaining on the term of this Agreement. Such payment will be calculated based on the average Royalty Fees you paid (or if unpaid, payable) during the 12 months immediately preceding the termination date (or shorter period if you will have operated for less than 12 months). The parties hereby acknowledge and agree that the actual damages that would be incurred by Afuri in the event of any breach or early termination of this Agreement by Franchisee would be difficult to calculate and that the liquidated damages provided for in this Agreement are fair and reasonable under the circumstances. The parties further acknowledge and agree that the liquidated damages specified in this Section are only intended to compensate Afuri for the early termination of this Agreement and Afuri's loss of royalty revenue resulting therefrom, but not for any other breach of this Agreement by Franchisee or any other damages incurred by Afuri, and all remedies applicable thereto remain available to Afuri.
Source: Item 23 — Receipts (FDD pages 50–189)
What This Means (2024 FDD)
According to the 2024 Afuri Ramen Dumpling FDD, if a franchisee violates the terms of the Franchise Agreement, Afuri Ramen Dumpling has certain recourse options. Specifically, if the franchisee terminates the agreement outside the terms of Section 6.2, or if Afuri Ramen Dumpling terminates the agreement due to the franchisee's actions, the franchisee must pay liquidated damages to Afuri Ramen Dumpling.
The liquidated damages are calculated as the royalty fees that should have been paid for either 24 months or the remaining months on the agreement, whichever is less. This calculation is based on the average royalty fees paid (or payable) during the 12 months before termination. If the franchise operated for less than 12 months, the calculation uses the shorter period.
The FDD states that these liquidated damages are intended to compensate Afuri Ramen Dumpling for the early termination and the resulting loss of royalty revenue. However, these damages do not cover any other breaches of the agreement or other damages incurred by Afuri Ramen Dumpling, for which Afuri Ramen Dumpling retains all applicable remedies. This means Afuri Ramen Dumpling can pursue additional legal or financial remedies for other violations beyond the early termination itself.