What constitutes 'Wind-Down Damages' if a Belocal franchisee abandons the business?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
. Franchisee and Franchisor agree that it would be difficult if not impossible to determine the amount of damages that Franchisor would suffer due to Franchisee (i) abandoning the Franchised Business prior to the expiration date or a mutually agreed upon termination date or (ii) failing to comply with the wind-down procedures in the Franchise Brand Standards Manual. 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 Franchiso
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, Wind-Down Damages are defined as the amount Belocal would charge a franchisee for (i) abandoning the franchised business before the expiration or agreed termination date, or (ii) failing to comply with the wind-down procedures outlined in the Franchise Brand Standards Manual.
Specifically, Belocal and the franchisee agree that calculating the exact damages to Belocal from such actions would be difficult. Therefore, they stipulate that a reasonable estimate of these damages, considered as liquidated damages rather than a penalty, will be the greater of two amounts: either six months' worth of the average royalty the franchisee paid over the prior 12 months, or a flat fee of $2,500.
Belocal retains the right to deduct or withhold these Wind-Down Damages from any commissions owed to the franchisee or to transfer the amount via EFT (Electronic Funds Transfer) from the franchisee to Belocal. This clause aims to protect Belocal from losses incurred if a franchisee abruptly ceases operations or fails to properly wind down the business as per the established standards.