Within how many days after termination must an Auntie Annes franchisee pay the liquidated damages?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
- B. Payment of Liquidated Damages. You will pay all amounts stated in this Section 18.3 within 30 days after the termination of this Agreement. You agree, and you direct any party construing this Agreement to conclusively presume, that the damages stated in this Section 18.3: (i) are true liquidated damages; (ii) are intended to compensate us for the harm we will suffer; (iii) are not a penalty; (iv) are a reasonable estimate of our probable loss resulting from your defaults, viewed as of the termination date; and (v) will be in addition to all other rights we have to obtain
Source: Item 22 — CONTRACTS (FDD page 106)
What This Means (2024 FDD)
According to Auntie Annes's 2024 Franchise Disclosure Document, if the Franchise Agreement is terminated, a franchisee must pay all liquidated damages within 30 days after the termination date. These damages are designed to compensate Auntie Annes for the loss of the benefit they were entitled to receive under the agreement.
The liquidated damages are calculated as a lump-sum payment equal to the average monthly Royalty Fee owed during the 36 months before termination, multiplied by the lesser of the remaining term or 36 months. If the franchise operated for less than 36 months, the damages will be based on the average monthly Royalty Fee during that shorter period, still multiplied by 36. If termination occurs before the Opening Date, the franchisee will forfeit the Initial Franchise Fee but will not owe any liquidated damages.
This means that a franchisee needs to be prepared to make a significant payment to Auntie Annes shortly after the franchise agreement is terminated. It is important for prospective franchisees to understand how these damages are calculated and to factor this potential cost into their financial planning. The FDD specifies that these damages are not a penalty but a reasonable estimate of the probable loss resulting from the franchisee's default.