Does the Afuri Ramen Dumpling franchisee have the right to terminate the agreement?
Afuri_Ramen_Dumpling Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee acknowledges and agrees that it does not have the right to terminate this Agreement, except as provided in Section 6.2, or as otherwise agreed in writing by the parties, and that any termination of this Agreement by Franchisee that is not in accordance with the terms of Section 6.2, or any termination of this Agreement by Afuri in accordance with its 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.
Source: Item 23 — Receipts (FDD pages 50–189)
What This Means (2024 FDD)
According to the 2024 Afuri Ramen Dumpling Franchise Disclosure Document, the franchisee has limited rights to terminate the agreement, as specified in Section 6.2. If the franchisee terminates the agreement outside of these specific terms, or if Afuri Ramen Dumpling terminates the agreement due to the franchisee's default, the franchisee may incur significant financial penalties.
Specifically, if the franchisee terminates the agreement without adhering to Section 6.2, they must pay Afuri Ramen Dumpling liquidated damages. These damages are calculated as the royalty fees the franchisee would have paid for either 24 months or the remaining term of the agreement, whichever is less. This calculation is based on the average royalty fees paid (or payable) during the 12 months preceding the termination date, or a shorter period if the franchisee operated for less than 12 months.
Furthermore, the franchisee acknowledges that terminating the agreement outside the terms of Section 6.2, or termination by Afuri Ramen Dumpling due to franchisee default, may result in lost future revenue and profits for Afuri Ramen Dumpling, harm to the goodwill associated with the licensed marks, and increased costs for re-developing or re-franchising the market. The franchisee also agrees to pay all actual and consequential damages, costs, and expenses, including reasonable attorney's fees, incurred by Afuri Ramen Dumpling as a result of such default and termination. This highlights the importance of understanding the conditions under which a franchisee can terminate the agreement without incurring substantial financial repercussions.