How is the amount of 'Wind-Down Damages' calculated for a Belocal franchise?

According to Belocal's 2025 Franchise Disclosure Document, the 'Wind-Down Damages' are calculated as a liquidated damages amount, not as a penalty. This amount is intended to cover the damages Belocal would incur if a franchisee abandons the business before the agreement expires or fails to follow the wind-down procedures outlined in the Franchise Brand Standards Manual.

The specific amount of these damages is determined to be the greater of two figures: either six months' worth of the average Royalty the franchisee paid over the prior 12 months, or a flat fee of $2,500. This calculation provides a baseline for the financial repercussions a franchisee might face for not adhering to the proper closure protocols or prematurely abandoning the Belocal franchise.

Belocal retains the right to deduct or withhold these Wind-Down Damages from any commissions owed to the franchisee or to transfer the damages via EFT (Electronic Funds Transfer) from the franchisee to Belocal. This ensures that Belocal has a direct mechanism for recovering these damages, should the situation arise.

Prospective Belocal franchisees should understand these Wind-Down Damages as a significant potential cost associated with non-compliance during the termination or transfer of their franchise. It highlights the importance of adhering to the wind-down procedures and maintaining operations until the agreed-upon termination date to avoid these charges.