What are the potential consequences for an Afuri Ramen Dumpling franchisee who terminates the agreement outside of the allowed circumstances?
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.
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)
According to the 2024 Afuri Ramen Dumpling Franchise Disclosure Document, if a franchisee terminates the agreement outside the terms specified in 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 within 30 days of termination. This amount is not considered a penalty but rather compensation for the early termination.
The liquidated damages are calculated as the royalty fees the franchisee would have paid for either 24 months or the remaining months on the agreement, whichever is less. The 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's average.
Afuri Ramen Dumpling acknowledges that calculating the exact damages from early termination is difficult, and the liquidated damages are a fair estimate. These damages specifically cover the loss of royalty revenue due to the termination but do not preclude Afuri Ramen Dumpling from pursuing other remedies for any other breaches of the agreement by the franchisee. Additionally, upon termination, Afuri Ramen Dumpling has the right to license or franchise the territory to someone else or operate their own Afuri business there, and the franchisee is subject to a post-termination non-compete agreement for two years.