Under what condition are Liquidated Damages payable by an Afuri Ramen Dumpling franchisee?
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 Afuri Ramen Dumpling's 2024 Franchise Disclosure Document, liquidated damages become payable if the franchisee defaults on the Franchise Agreement and Afuri Ramen Dumpling subsequently terminates the agreement.
The amount of liquidated damages is calculated as two times the total Royalty Fees paid (or payable if unpaid) by the franchisee during the 24 months preceding the termination date. This means that if a franchisee's agreement is terminated due to default, they will owe Afuri Ramen Dumpling twice the amount of royalties they paid (or should have paid) over the previous two years.
The liquidated damages are due within 30 days following the date of termination. This is a relatively standard clause in franchise agreements, designed to compensate the franchisor for losses incurred due to the franchisee's default and the early termination of the agreement. Prospective franchisees should understand this obligation and ensure they have the financial capacity to cover such damages in the event of a default leading to termination.