What is the minimum number of months used in the liquidated damages calculation 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.
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. The number of months used in this calculation is the lesser of 24 or the number of months remaining in the franchise agreement's term.
This means that if a franchisee breaches the agreement, Bombs Away will calculate damages based on the remaining term, up to a maximum of 24 months. For example, if there are 36 months left on the term, the calculation will only use 24 months. However, if only 10 months remain, then 10 months will be used.
This liquidated damages clause provides a degree of predictability for both Bombs Away and the franchisee in the event of a default. It caps the potential damages at 24 months of average Royalty Fees and Marketing Fund Contributions, but also ensures that Bombs Away is compensated for the actual remaining term if it is shorter than 24 months. Franchisees should understand this calculation and its implications before signing the franchise agreement.