Is the deposit refundable upon early termination of the Afuri Ramen Dumpling agreement?
Afuri_Ramen_Dumpling Franchise · 2024 FDDAnswer from 2024 FDD Document
ts terms, may result in lost future revenue and profits to Afuri, harm to the goodwill associated with the Licensed Marks, and increased costs to Afuri to re-develop or re-franchise the market in which the Franchised Operation is located.
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.
6.6 We May Assign Franchise Territory Upon Termination. Upon expiration or termination of this Agreement, we may immediately license or franchise the Franchise Territory to another person or may operate Afuri businesses within the Franchise Territory.
6.7 You and Your Owners Not to Compete on Expiration, Termination or Transfer of Agreement.
- 6.7.1 Post-Termination Non-Compete. This covenant will apply for two years after termination, expiration or transfer of this Agreement.
Source: Item 23 — Receipts (FDD pages 50–189)
What This Means (2024 FDD)
The 2024 Afuri Ramen Dumpling Franchise Disclosure Document does not specify whether any deposits are refundable upon early termination of the franchise agreement. However, it does state that if the franchisee terminates the agreement outside the terms of Section 6.2, or if Afuri Ramen Dumpling terminates the agreement, the franchisee must pay liquidated damages. These damages are equal to the royalty fees that would have been paid for either 24 months or the number of months remaining on the agreement, whichever is less. This calculation is based on the average royalty fees paid (or payable) during the 12 months before termination.
Additionally, upon termination for any reason, the franchisee is obligated to return all proprietary and confidential materials to Afuri Ramen Dumpling. If the franchisee fails to do so, Afuri Ramen Dumpling has the right to enter the business premises to remove these items, and the franchisee will be responsible for any expenses incurred during this process. The franchisee must also sell equipment and inventory to Afuri Ramen Dumpling at fair market value for equipment and invoice cost less a 10% restocking charge for inventory.
Prospective franchisees should carefully review Section 6.2 of the franchise agreement to understand the conditions under which they can terminate the agreement without incurring significant financial penalties. It is also important to clarify with Afuri Ramen Dumpling what deposits are required, under what conditions they are refundable, and to seek legal counsel to fully understand the implications of the termination clauses within the franchise agreement.