What is the timeframe for a Big Blue Swim School franchisee to pay liquidated damages after termination?
Big_Blue_Swim_School Franchise · 2025 FDDAnswer from 2025 FDD Document
Therefore, upon termination of this Agreement, as provided above, before the Term's scheduled expiration date, you agree to pay us in a lump sum, within the timeframe we specify, liquidated damages equal to the product of either twenty-four (24) or the number of months that would have remained in the Term (as of the effective date of termination) had it not been terminated, whichever is shorter, multiplied by the average monthly Royalties and Brand Fund contributions that were due and payable to us during the twelve (12) months before the month of termination (or for such lesser period that the School has been open, if less than twelve (12) months).
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Big Blue Swim School FDD, if the franchise agreement is terminated either by Big Blue Swim School for cause or by the franchisee without cause before the end of its term, the franchisee must pay liquidated damages. The specific timeframe for payment is determined by Big Blue Swim School, as the franchisee agrees to pay the damages in a lump sum within the timeframe that Big Blue Swim School specifies.
The liquidated damages are intended to cover losses such as lost royalties, brand fund contributions, market penetration, goodwill, and other expenses Big Blue Swim School incurs in finding a new franchisee. The amount is calculated based on a formula that considers the shorter of either 24 months or the number of months remaining in the franchise term, multiplied by the average monthly royalties and brand fund contributions from the 12 months before termination (or a shorter period if the school has been open for less than a year).
This means that a franchisee needs to be prepared to potentially make a significant lump-sum payment upon termination, and the timing of this payment is at the discretion of Big Blue Swim School. Prospective franchisees should carefully consider this potential financial obligation and factor it into their business planning and risk assessment. It is important to have sufficient capital or access to funds to cover this potential expense, and to understand the circumstances under which termination might occur.