What is the nature of the lump sum payment that a defaulting Baya Bar franchisee must pay?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
- 18.1.8 in the event this Agreement is terminated due to Franchisee's default, pay Franchisor a lump sum payment (as liquidated damages and not as a penalty) in an amount equal to: (a) the average weekly Royalty Fee and Brand Fund Contribution payable by Franchisee over the twelve (12) month period immediately prior to the date of termination (or such shorter time period if the Franchised Business has been open less than twelve (12) months); (b) multiplied by the lesser of (i) twenty-four (24) months or (ii) the number of months then remaining in the then-current term of this Agreement.
Franchisee acknowledges that a precise calculation of the full extent of the damages Franchisor will incur in the event of termination of this Agreement as a result of Franchisee's default is difficult to determine and that this lump sum payment is reasonable in light thereof.
The liquidated damages payable by Franchisee pursuant to this Section 18.1.8 shall be in addition to all other amounts payable under this Agreement and shall not affect Franchisor's right
Source: Item 22 — CONTRACTS (FDD page 56)
What This Means (2024 FDD)
According to Baya Bar's 2024 Franchise Disclosure Document, if the Franchise Agreement is terminated due to the franchisee's default, the franchisee must pay Baya Bar a lump sum payment. This payment is considered liquidated damages and not a penalty.
The amount of this lump sum is calculated based on a formula. First, the average weekly Royalty Fee and Brand Fund Contribution payable by the franchisee over the twelve-month period immediately before termination is determined. If the business has been open for less than twelve months, the average is calculated over the shorter period. This average weekly amount is then multiplied by the lesser of 24 months or the number of months remaining in the current term of the Franchise Agreement.
Baya Bar emphasizes that this lump sum payment is in addition to all other amounts payable under the Franchise Agreement. It also does not affect Baya Bar's right to seek injunctive relief and other remedies available under other provisions of the agreement. Baya Bar states that calculating the full extent of damages they will incur due to termination is difficult to determine precisely, and the lump sum payment is a reasonable estimate of those damages.