What constitutes abandonment of a Big Apple Bagels store for the purpose of liquidated damages?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor shall have the right to impose liquidated damages against Franchisee in the following events: (a) Franchisee terminates this Agreement without good cause, (b) Franchisor terminates this Agreement based on Franchisee's material breaches under this Agreement, (c) Franchisee abandons the BAGELS Store, which for purposes of this Section is failing to open or operate the BAGELS Store for more than three (3) consecutive days, or (d) Franchisee transfers an interest in the BAGELS Store or the ownership of Franchisee or of the assets of Franchisee or the BAGELS Store (or any interest therein) without fully complying with Paragraph 14.b. of this Agreement, whether or not Franchisor terminates this Agreement.
The amount of liquidated damages shall be equal to (i) the number of months remaining in the term of this Agreement, times (ii) the average Gross Revenues of Franchisee's Store during the thirty-six (36) month period immediately preceding the date of termination (or if Franchisee has been in business less than 36 months, then during the entire period Franchisee has been in business), times (iii) five percent (5%), times (iv) the present value factor based on an interest rate of four percent (4%) per year (4/12% per month), using the Present Value of an Annuity.
Source: Item 22 — CONTRACTS (FDD pages 86–87)
What This Means (2025 FDD)
According to Big Apple Bagels' 2025 Franchise Disclosure Document, abandoning a store, which can trigger liquidated damages, is specifically defined as failing to open or operate the Big Apple Bagels store for more than three consecutive days. This definition is important because it sets a clear standard for what Big Apple Bagels considers abandonment, which can lead to financial penalties for the franchisee.
This definition of abandonment is tied to the franchisor's right to impose liquidated damages. If a franchisee abandons the store as defined, Big Apple Bagels has the right to claim damages. The amount of these damages is calculated based on a formula that considers the remaining term of the franchise agreement, the store's average gross revenues over the preceding 36 months (or the entire operating period if less than 36 months), a percentage of 5%, and a present value factor based on a 4% annual interest rate.
It's crucial for a prospective Big Apple Bagels franchisee to understand this definition and its implications. Failing to operate the store for more than three consecutive days, for any reason, could be considered a breach of the agreement and result in significant financial penalties. This could occur due to unforeseen circumstances such as illness, emergencies, or even logistical issues. Franchisees should ensure they have contingency plans in place to avoid any situation that could lead to the store being closed for such a period, and they should communicate proactively with Big Apple Bagels if such a situation arises.