How are Liquidated Damages calculated for an Afuri Ramen Dumpling franchise?
Afuri_Ramen_Dumpling Franchise · 2024 FDDAnswer from 2024 FDD Document
| Type of Fee | Amount | Date Due | Remarks |
|---|---|---|---|
| Franchise Agreement Section 5.1). | |||
| Non-Cash Payment Systems | All costs associated with non-cash payment systems | As incurred | You must accept debit cards, credit cards, stored value gift cards or other non-cash payment systems we specify. |
| Manual Replacement Fee | $500 | On demand | You pay this fee if you lose the copy of the Operations Manual we loan to you. |
| Re-Inspection Fee | $500 per re-inspection | On demand | You pay this fee if we must re-visit your location for an inspection after you have already been notified of any deficiency or non- satisfactory condition. |
| Liquidated Damages | An amount equal to two times the total Royalty Fees paid (or if unpaid, payable) by you during the 24 months before the termination date. | Within 30 days following the date of termination. | Payable if you default and we terminate your Franchise Agreement. |
| Sanitation and Food Safety Audits | Cost of the inspection | On demand | We may, in our sole discretion, contract with a third party to conduct sanitation and food safety audits during the term of your Franchise Agreement. |
| Business/Financial Audit7 | Our reasonable costs for the audit if you understate revenue by more than 2% or fail to deliver to us required reports on time | Immediately upon demand | See notes below. |
| Participation in Advisory Council | As incurred | As incurred | If you participate on an Advisory Council, you will pay any costs you incur related to your participation, such as travel and living expenses to attend |
Source: Item 6 — Other Fees (FDD pages 11–16)
What This Means (2024 FDD)
According to the 2024 Afuri Ramen Dumpling Franchise Disclosure Document, liquidated damages are imposed if the Franchise Agreement is terminated due to the franchisee's default. The amount of these damages is calculated as two times the total Royalty Fees that were either paid or payable by the franchisee during the 24 months immediately preceding the termination date.
For a prospective Afuri Ramen Dumpling franchisee, this means that if the franchise agreement is terminated due to a default, they will be required to pay a significant sum to Afuri Ramen Dumpling. This sum is directly tied to the royalty fees paid over the two years before termination, so higher revenues (and thus higher royalty payments) will result in higher liquidated damages.
The liquidated damages must be paid within 30 days following the date of termination. This could create a substantial financial burden on the franchisee at a time when they are already facing business closure. It is important for potential franchisees to understand the circumstances under which default and termination may occur, as well as the potential financial implications of such an event.