Why are 'Liquidated Damages' used in the Baymont Inn Suites agreement?

According to the 2025 Baymont Inn Suites Franchise Disclosure Document, liquidated damages are used because actual damages are difficult to determine on the effective date of the agreement. The document states that the amount set is a reasonable pre-estimate of the damages that will be incurred and is not a penalty.

In essence, liquidated damages provide a predetermined financial remedy for specific breaches of the franchise agreement. This can offer both Baymont Inn Suites and the franchisee a degree of certainty and predictability in the event of a dispute, avoiding the often complex and costly process of proving actual damages in court.

However, it's important to note that the enforceability of liquidated damages clauses can vary by state. For example, the FDD mentions that liquidated damages are prohibited by law in North Dakota. Additionally, California law states that certain liquidated damages clauses are unenforceable. Prospective Baymont Inn Suites franchisees should be aware of the laws in their specific state regarding liquidated damages and consult with an attorney to understand their rights and obligations under the franchise agreement.