How can Belocal collect the Wind-Down Damages from the franchisee?

According to Belocal's 2025 Franchise Disclosure Document, Belocal has the right to collect Wind-Down Damages from a franchisee under specific circumstances related to the termination or expiration of the franchise agreement. These damages are imposed if the franchisee abandons the franchised business before the agreed-upon termination or expiration date, or if they fail to comply with the wind-down procedures outlined in the Franchise Brand Standards Manual. The Wind-Down Damages are considered a reasonable estimate of the losses Belocal would incur due to such actions by the franchisee. The damages are not a penalty, but rather liquidated damages. The amount of Wind-Down Damages is the greater of six months' worth of the average Royalty the franchisee paid for the prior 12 months or $2,500.

Belocal has two specific mechanisms for collecting these Wind-Down Damages. First, Belocal can deduct or withhold the Wind-Down Damages from any Commissions owed to the franchisee. Second, Belocal can transfer the Wind-Down Damages via Electronic Funds Transfer (EFT) from the franchisee directly to Belocal.

It is important for a prospective Belocal franchisee to understand these conditions, as failing to adhere to the wind-down procedures or abandoning the business prematurely can result in these charges. Franchisees should familiarize themselves with the Franchise Brand Standards Manual to fully understand their obligations during the wind-down period. Franchisees should also be aware that Belocal may pursue other remedies available for breach of contract, in addition to collecting Wind-Down Damages.