What is the maximum number of months used in the liquidated damages calculation for a Bombs Away franchise?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
- 14.5 Liquidated Damages. 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.
Source: Item 22 — CONTRACTS (FDD pages 35–36)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, the liquidated damages calculation involves multiplying the average monthly Royalty Fees and Marketing Fund Contributions by a certain number of months. If Bombs Away terminates the Franchise Agreement due to the franchisee's default, or if the franchisee terminates the agreement without permission, the franchisee must pay Bombs Away a lump sum as liquidated damages.
The number of months used in this calculation is the lesser of 24 or the number of months remaining in the agreement's term. This means that the maximum number of months that could be used in the calculation is 24 months.
This liquidated damages clause is designed to compensate Bombs Away for the anticipated loss of future royalty and marketing fund contributions. However, the franchisee's payment does not cover 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.