Does the Body20 franchise agreement state that liquidated damages are intended as compensation or as a penalty?

According to Body20's 2025 Franchise Disclosure Document, the franchise agreement specifies that liquidated damages are intended to compensate the franchisor for harm suffered due to early termination, and are not a penalty. This is a common practice in franchising, where early termination can disrupt the franchisor's business model and revenue projections.

The agreement states that the franchisee agrees and directs any party construing the agreement to conclusively presume that the damages are true liquidated damages, intended to compensate Body20 for the harm suffered, and are not a penalty. It also states that the damages are a reasonable estimate of probable loss resulting from the franchisee's defaults, viewed as of the termination date, and will be in addition to all other rights Body20 has to obtain legal or equitable relief.

For a prospective Body20 franchisee, this means that if the franchise agreement is terminated early (after the studio opens), they will be obligated to pay liquidated damages to Body20. These damages are calculated to compensate Body20 for the anticipated loss of revenue and business benefits. The liquidated damages are equal to the average monthly Royalty Fee owed during the 12 months before the termination date times the lesser of the remainder of the Term or 36 months. If the studio has been open for less than 12 months, the liquidated damages will be the average monthly Royalty Fee during the time between the date the Studio opens and the termination date, multiplied by 36. However, if the termination occurs before the studio opens, the franchisee will forfeit the Franchise Fee paid and will not owe any liquidated damages.