Under what circumstances is Apricot Lane entitled to liquidated damages if the franchisee discontinues operation?
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 term, Apricot Lane is entitled to liquidated damages. The liquidated damages will be calculated based on the remaining term of the agreement and the franchisee's past royalty payments.
Specifically, the liquidated damages will equal the monthly average of royalty payments from the prior 36 months, multiplied by the number of months remaining in the franchise agreement. This calculation aims to compensate Apricot Lane for the anticipated royalty revenue they would have received had the franchisee continued operating for the full term.
If the franchisee has failed to submit accurate gross revenue reports, Apricot Lane has the right to estimate gross revenues based on available reports from prior periods to calculate the amount due. The FDD states that this payment represents liquidated damages for the loss of anticipated benefits due to premature termination, and it is not considered a penalty or a substitute for any other payments owed to Apricot Lane.