If an Apricot Lane franchisee discontinues operations before the agreement expires, what is the first method for calculating the liquidated damages owed to Apricot Lane?
Apricot_Lane Franchise · 2025 FDDAnswer from 2025 FDD Document
months remain under the term of the Agreement at the time operations discontinue, the monthly average of Royalty payments for the prior thirty-six (36) months times the number of months remaining in the term of this Agreement. If FRANCHISOR cannot determine the exact payment due on account of FRANCHISEE's failure to submit reports of Gross Revenues as required hereunder, for purposes of computing the amount due under this Section, FRANCHISOR may estimate the Gross Revenues based on reports submitted by FRANCHISEE for any period of time available prior to cessation of operation. The payment provided for herein is FRANCHISOR's liquidated damages for the loss of the benefits it bargained for in this Agreement due to its premature termination and is not a penalty or in lieu of any other payment due to FRANCHISOR from FRANCHISEE.
Source: Item 23 — RECEIPTS (FDD pages 51–222)
What This Means (2025 FDD)
According to Apricot Lane's 2025 Franchise Disclosure Document, if a franchisee discontinues operations before the end of their franchise agreement, the first method for calculating liquidated damages involves determining the monthly average of royalty payments from the prior 36 months. This average is then multiplied by the number of months remaining in the franchise term at the time operations ceased.
This calculation serves as Apricot Lane's compensation for the anticipated benefits lost due to the early termination of the agreement. It is important to note that this payment is considered liquidated damages and is not a penalty or a substitute for any other payments the franchisee owes to Apricot Lane.
If Apricot Lane cannot accurately determine the royalty payment due to the franchisee's failure to submit gross revenue reports, Apricot Lane may estimate gross revenues based on available reports from prior periods to calculate the amount due. This highlights the importance of franchisees maintaining accurate and timely financial reporting to avoid estimations that may not be in their favor.
Prospective franchisees should understand that discontinuing operations prematurely can result in significant financial obligations to Apricot Lane. This provision underscores the importance of carefully considering the risks and potential challenges of operating an Apricot Lane franchise before entering into an agreement.