How are liquidated damages calculated for a terminated Bhc franchise agreement?

According to Bhc's 2025 Franchise Disclosure Document, liquidated damages are calculated based on a formula that considers average monthly fees and the remaining term of the franchise agreement. If the franchise agreement is terminated, Bhc calculates liquidated damages by first determining the average of the royalty fees, advertising fees, and technology fees payable each month over the 12-month period immediately preceding the termination date. If the Master Franchised Bhc Restaurant has been open for less than 12 months, the average monthly royalty and advertising fees payable for the period the restaurant was open are used instead. This average monthly fee is then multiplied by the lesser of 36 months or the number of months remaining in the current term of the Franchise Agreement.

If no Master Franchised Bhc Restaurant has been opened at the time of termination, the calculation changes. In this case, Bhc's lost future revenues resulting from the Master Franchisee's breach will be an amount equal to the average monthly royalty fees, advertising fees, and additional fees payable by other similar franchisees within twenty-five (25) miles of any of Master Franchisee's proposed locations. This amount is then multiplied by the lesser of thirty-six (36) months or the number of months then remaining in the then-current term of this Agreement.

This liquidated damages clause means that a franchisee who breaches the agreement could owe Bhc a significant sum, especially if the remaining term is lengthy. Prospective franchisees should carefully consider this clause and understand the potential financial implications of early termination. It is important to note that these liquidated damages are in lieu of any damages for Bhc's lost future revenue but are in addition to any other damages, costs, and expenses to which Bhc may be entitled.