Is the additional transfer fee charged by Beehive Homes considered a penalty?
Beehive_Homes Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee engages in an Unauthorized Transfer as provided in Section 13.2 or Section 13.6, Franchisee hereby covenants and promises to pay to Franchisor, in addition to all other costs and expenses provided for in this Agreement, an additional transfer fee in an amount equal to ten (10) times [5% times [12 times [the greater of (i) the average published monthly rate per resident of the Home during the 12 months preceding the Unauthorized Transfer, times the number of beds in the Home, or (ii) the average published monthly rate per resident of the home which has been in operation for the preceding 18 month and is in nearest geographic proximity to the Home , times the number of beds in the Home]]]. The parties hereto agree that this additional transfer fee is not a penalty, but the parties' best estimate of the anticipated damage to Franchisor resulting from the Unauthorized Transfer.
Source: Item 23 — RECEIPTS (FDD pages 34–123)
What This Means (2025 FDD)
According to Beehive Homes' 2025 Franchise Disclosure Document, the additional transfer fee associated with an unauthorized transfer is explicitly stated not to be a penalty. Instead, Beehive Homes considers it to be the parties' best estimate of the anticipated damage to the franchisor resulting from the unauthorized transfer. This fee is calculated as ten times a specific amount.
The calculation involves multiplying 5% by 12 and then multiplying that result by the greater of two figures: (i) the average published monthly rate per resident of the Home during the 12 months preceding the Unauthorized Transfer, times the number of beds in the Home, or (ii) the average published monthly rate per resident of the home which has been in operation for the preceding 18 month and is in nearest geographic proximity to the Home, times the number of beds in the Home.
This distinction is important because penalties may face different legal interpretations and enforceability compared to liquidated damages, which is what Beehive Homes is claiming the fee to be. Prospective franchisees should understand how Beehive Homes calculates this fee and the circumstances under which it would be imposed, as engaging in an unauthorized transfer could result in a substantial financial obligation.