What constitutes the 'Damage Threshold' for a Big Blue Swim School in the event of fire or other casualty?
Big_Blue_Swim_School Franchise · 2025 FDDAnswer from 2025 FDD Document
If the School is damaged by fire or other casualty, you must notify us immediately. If the cost to repair the damage is less than or equal to the Damage Threshold (defined below), or if the cost to repair the damage exceeds the Damage Threshold but you notify us within a reasonable time after the casualty that you intend to repair the damage and operate the School as a BIG BLUE Swim School, then you must repair the damage promptly according to the Brand Standards and this Agreement's other terms and conditions. The "Damage Threshold" means the greater of (a) sixty percent (60%) of the School's market value immediately before the fire or other casualty, or (b) the amount of insurance proceeds made available to you in connection with the fire or casualty. If the damage or repair requires you to close all or any portion of the School, then you must commence reconstruction as soon as practicable (but in any event within four (4) months) after closing the School and reopen for continuous business operations as a BIG BLUE Swim School as soon as practicable (but in any event within twenty-four (24) months) after closing the School, but not without complying with this Agreement's other terms and conditions.
If the cost to repair the damage from a fire or other casualty exceeds the Damage Threshold and you fail to notify us within a reasonable time after the casualty that you either intend to repair the damage and operate the School as a BIG BLUE Swim School or elect not to repair the damage and operate the School as a BIG BLUE Swim School, then either party has the right to terminate this Agreement immediately upon written notice to the other. If this Agreement is terminated pursuant to this Section, and if you and your owners sign a termination agreement, then the amount of liquidated damages payable under Section 20.H will not exceed the amount of any insurance proceeds that you receive relating to the fire or other casualty. You must give us the documentation we reasonably request to calculate the Damage Threshold and the insurance proceeds you receive in connection with any fire or other casualty. However, the termination agreement will provide
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to Big Blue Swim School's 2025 Franchise Disclosure Document, the 'Damage Threshold' is a key figure in determining the next steps if a school suffers damage from fire or other casualty. It is defined as the greater of two amounts. The first is sixty percent (60%) of the school's market value immediately before the incident. The second is the total amount of insurance proceeds the franchisee receives in connection with the fire or casualty.
If the cost to repair the damage is less than or equal to the Damage Threshold, the franchisee is obligated to repair the damage promptly, adhering to Big Blue Swim School's Brand Standards and the franchise agreement. Similarly, if the repair costs exceed the Damage Threshold, but the franchisee informs Big Blue Swim School of their intent to repair and continue operating as a Big Blue Swim School, they must also proceed with repairs promptly. Reconstruction must begin within four months of closing any part of the school, and the school must reopen for continuous business within twenty-four months, complying with all agreement terms.
However, if the repair costs exceed the Damage Threshold and the franchisee does not notify Big Blue Swim School of their intention to repair, either party has the right to terminate the franchise agreement. If the agreement is terminated under these circumstances, and a termination agreement is signed, the liquidated damages the franchisee owes will not exceed the insurance proceeds received. The franchisee must provide documentation to allow Big Blue Swim School to calculate the Damage Threshold and the insurance proceeds.