What components are used to calculate the liquidated damages for a Bombs Away franchise?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
If Bombs Away Franchising terminates this Agreement based upon Franchisee's default (or if Franchisee purports to terminate this Agreement except as permitted under Section 14.1), then within 10 days thereafter Franchisee shall pay to Bombs Away Franchising a lump sum (as liquidated damages and not as a penalty) calculated as follows: (x) the average Royalty Fees and Marketing Fund Contributions that Franchisee owed to Bombs Away Franchising under this Agreement for the 12-month period preceding the date on which Franchisee ceased operating the Business; multiplied by (y) the lesser of (1) 24 or (2) the number of months remaining in the then-current term of this Agreement.
If Franchisee had not operated the Business for at least 12 months, then (x) will equal the average Royalty Fees and Marketing Fund Contributions that Franchisee owed to Bombs Away Franchising during the period that Franchisee operated the Business.
The "average Royalty Fees and Marketing Fund Contributions that
Source: Item 22 — CONTRACTS (FDD pages 35–36)
What This Means (2024 FDD)
According to the 2024 Bombs Away Franchise Disclosure Document, liquidated damages are calculated if Bombs Away terminates the agreement due to the franchisee's default, or if the franchisee attempts to terminate the agreement without proper cause. In such cases, the franchisee must pay a lump sum within 10 days, which is not considered a penalty but rather liquidated damages.
The calculation involves two main components. First, the average Royalty Fees and Marketing Fund Contributions that the franchisee owed to Bombs Away for the 12-month period preceding the date the franchisee ceased operating the business. If the franchisee operated the business for less than 12 months, the average is calculated based on the period they were in operation. This average is then multiplied by the lesser of 24 or the number of months remaining in the current term of the franchise agreement.
The FDD specifies that any deferred or reduced Royalty Fees and Marketing Fund Contributions outlined in an addendum to the agreement will not discount or adjust the average unless Section 14.5 is specifically amended in such addendum. This payment covers Bombs Away's loss of future Royalty Fees and Marketing Fund Contributions but does not include damages and other amounts arising under Section 14.3 and Section 14.4, Bombs Away's right to injunctive relief for enforcement of Article 13, and any attorneys' fees and other costs and expenses to which Bombs Away is entitled under this Agreement.