How is the liquidated damages amount calculated for an Afuri Ramen Dumpling franchise termination?
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 Afuri Ramen Dumpling's 2024 Franchise Disclosure Document, the liquidated damages calculation depends on which party terminates the agreement and under what conditions. If the franchisee terminates the agreement outside the terms of Section 6.2, or if Afuri Ramen Dumpling terminates the agreement according to its terms, the franchisee must pay liquidated damages.
The liquidated damages amount is equal to the royalty fees the franchisee would have paid had the agreement not been terminated. This calculation covers the lesser of 24 months or the number of months remaining on the agreement's term. The average royalty fees paid (or payable, if unpaid) during the 12 months before termination are used to calculate this amount. If the franchise operated for less than 12 months, the calculation uses the shorter operating period.
Afuri Ramen Dumpling states that actual damages from early termination are difficult to calculate, and the liquidated damages are a fair and reasonable estimate. These damages are intended to compensate Afuri Ramen Dumpling for the early termination and loss of royalty revenue, but not for any other breach of the agreement or other damages incurred by Afuri Ramen Dumpling, for which other remedies remain available.