Is the liquidated damages payment for Apricot Lane considered a penalty or in lieu of other payments?
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 the 2025 Apricot Lane Franchise Disclosure Document, the liquidated damages payment is not considered a penalty or in lieu of other payments. The FDD states that the liquidated damages are for the loss of benefits that Apricot Lane bargained for in the agreement due to its premature termination.
The liquidated damages are calculated based on the remaining months left on the agreement at the time operations are discontinued. The calculation involves multiplying the monthly average of royalty payments from the prior 36 months by the number of months remaining in the agreement's term.
If Apricot Lane cannot determine the exact payment due to the franchisee's failure to submit gross revenue reports, Apricot Lane may estimate gross revenues based on available reports from any period before the cessation of operations. This estimation is solely for calculating the amount due under this section of the agreement.