Are the weekly payments for violating the Boulder Designs agreement considered a penalty?
Boulder_Designs Franchise · 2025 FDDAnswer from 2025 FDD Document
respect thereto shall continue in full force and effect.
The paragraph headings in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement. Whenever the context of this Agreement requires, the masculine gender includes the feminine or neuter and vice versa, and the singular number includes the plural. Capitalized terms not herein defined shall have the meaning set forth in the Franchise Agreement.
The Company shall be a third-party beneficiary of this Agreement.
If individual violates this Agreement and competes with Franchisor, its Assigns, or any Franchisees, Franchisor has the right to require that all sales made by the competitive business are reported to Franchisor. Individual will also pay to Franchisor, without demand, a weekly fee of $1000, retroactive to the first date of the violation and for each week that the violation continues or until judicial order is entered, without being deemed to revive or modify this Agreement. These payments are liquidated damages to compensate Franchisor for its damages from Individual's violation of this covenant not to compete and are not a penalty. Individual agrees that the length of time and geographical restrictions contained in this Agreement are fair and reasonable and not the result of overreaching, duress or coercion of any kind. Individual agrees that its full, uninhibited and faithful observance of each of the covenants in this Section will not cause any undue hardship financial or otherwise and that the enforcement of each of these covenants in this Section will not impair Individual's ability to obtain employment commensurate with Individual's abilities and
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Boulder Designs' 2025 Franchise Disclosure Document, the weekly payments for violating the agreement and competing with Boulder Designs are not considered a penalty. Instead, these payments are defined as liquidated damages.
If a franchisee violates the agreement and competes with Boulder Designs, the franchisee must report all sales made by the competitive business to Boulder Designs. Additionally, the franchisee will pay Boulder Designs a weekly fee of $1,000, retroactive to the first date of the violation. This payment continues for each week that the violation occurs or until a judicial order is entered.
The FDD states that these payments are to compensate Boulder Designs for damages resulting from the franchisee's violation of the covenant not to compete. The franchisee also agrees that the time and geographical restrictions within the agreement are fair and reasonable.