For Buns On Fire, what specific damages does the liquidated damages provision cover?
Buns_On_Fire Franchise · 2025 FDDAnswer from 2025 FDD Document
(i.) If Franchisor terminates this Agreement with cause, Franchisee must pay Franchisor liquidated damages equal to the average value of the Royalty Fees Franchisee paid (per month) to Franchisor during the twelve (12) months before the termination multiplied by (i) twenty-four
- (24), being the number of months in two (2) full years or (ii) the number of months remaining during the term of this Agreement, whichever is higher.
- (ii.) The parties hereto acknowledge and agree that it would be impracticable to determine precisely the damages Franchisor would incur from this Agreement's termination and the loss of cash flow from Royalty Fees due to, among other things, the complications of determining what costs, if any, Franchisor might have saved and how much the Royalty Fees would have grown over what would have been this Agreement's remaining term. The parties hereto consider
Source: Item 23 — RECEIPTS (FDD pages 49–200)
What This Means (2025 FDD)
According to the 2025 Buns On Fire Franchise Disclosure Document, the liquidated damages provision specifies the amount the franchisee must pay if Buns On Fire terminates the agreement with cause. The franchisee is obligated to pay an amount equal to the average monthly Royalty Fees paid during the 12 months preceding termination, multiplied by either 24 (representing two full years) or the number of months remaining in the agreement's term, whichever is higher.
The FDD states that the parties agree that determining the exact damages Buns On Fire would incur from the termination is impractical. This impracticability stems from the difficulty in calculating potential cost savings and projecting the growth of Royalty Fees over the remaining term of the agreement.
This clause means that a Buns On Fire franchisee who is terminated for cause could face a significant financial penalty. The amount is designed to compensate Buns On Fire for the anticipated loss of future royalty payments. Prospective franchisees should carefully consider this provision and understand the circumstances under which termination for cause could occur, as well as the potential financial impact.