What actions by a Belocal franchisee can lead to the franchisor charging Wind-Down Damages?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
. Therefore, Franchisee and Franchisor agree that a reasonable estimate of those damages (as liquidated damages and not as a penalty) is an amount equal to the greater of six months' worth of the average Royalty Franchisee paid for the prior 12 months or $2,500 ("Wind-Down Damages"). Franchisor shall have the right to deduct or withhold any Wind-Down Damages from Franchisee's Commissions or transfer the Wind-Down Damages by EFT from Franchisee to Franchisor.
11. OBLIGATIONS OF FRANCHISEE PRIOR TO OR UPON EXPIRATION OR TERMINATION
- A. Prior to the closing of a transfer of the Franchised Business or expiration of this Agreement, Franchisee shall comply with Franchisor's instructions regarding the wind-down of Franchisee's operations, comply with the wind-down procedures in the Franchise Brand Standards Manual, and cooperate in good faith with Franchisor, its affiliates, and their representatives during the wind-down period, including meeting digitally or in-person if requested. For the avoidance of doubt, Franchisee has an obligation to continue to operate the Franchised Business until the closing of the transfer or the expiration date. If Franchisee abandons the Franchised Business prior to the closing of the transfer or the expiration date or fails to comply with the wind-down procedures in the Franchise Brand Standards Manual, Franchisee shall be in default under this Agreement and Franchisor may charge the Wind-Down Damages. Franchisee shall pay all costs, expenses and attorneys' fees incurred by Franchisor in enforcing the terms and conditions of this provision. Nothing contained herein shall be construed as prohibiting Franchisor from additionally pursuing any other remedies which may be available to Franchisor for a breach.
- B. Upon the expiration or termination of this Agreement (including termination following transfer, if applicable), all rights granted to Franchisee hereunder shall immediately terminate, and Franchisee and its Principals must:
- (1) Immediately cease to conduct operations of the Franchised Business and cease holding themselves out as a franchisee (or a principal of a franchisee) of Franchisor (except for purposes of disclosing past experience on a resume);
- (2) Promptly discontinue all use of the Marks, Copyrighted Materials, and Confidential Information and take appropriate action to return to Franchisor, or deliver to the transferee if Franchisor so designates, all Copyrighted Materials and Confidential Information in Franchisee's possession or within its control;
- (3) Pay all amounts due under this Agreement;
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, Wind-Down Damages may be charged to a franchisee under specific circumstances related to the termination or transfer of the franchise. Belocal specifies that these damages are meant to compensate the franchisor for losses incurred when a franchisee does not properly wind down their business operations as required.
Specifically, Belocal may charge Wind-Down Damages if the franchisee abandons the franchised business before the closing of a transfer, the expiration date of the agreement, or the effective date of termination established by Belocal. Additionally, Wind-Down Damages may be levied if the franchisee fails to comply with the wind-down procedures outlined in the Franchise Brand Standards Manual. These procedures are designed to ensure a smooth transition and protect the Belocal brand.
In cases of mutual termination, if a Belocal franchisee fails to comply with the terms of the mutual termination and release agreement, abandons the franchised business prior to the date of mutual termination, or fails to comply with the wind-down procedures, Belocal retains the right to charge Wind-Down Damages. These damages are defined as the greater of six months' worth of the average Royalty the franchisee paid for the prior 12 months or $2,500. The franchisor can deduct or withhold these damages from the franchisee's commissions or transfer the Wind-Down Damages via EFT from the franchisee to the franchisor.