Under what conditions must a Burneys Sweets More franchisee pay liquidated damages?
Burneys_Sweets_More Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisor terminates this Agreement based upon Franchisee's default (or if Franchisee purports to terminate this Agreement except as permitted under Section 17(f)), then within 10 days thereafter Franchisee shall pay to Franchisor a lump sum (as liquidated damages and not as a penalty) calculated as follows: (x) the average monthly Royalty Fees and Brand Fund contributions that Franchisee owed to Franchisor under this Agreement for the 52-week period preceding the date on which Franchisee ceased operating the Business; multiplied by (y) the lesser of (1) 104 or (2) the number of weeks remaining in the then-current term of this Agreement.
If Franchisee had not operated the Business for at least 52 weeks, then (x) will equal the average Royalty Fees and Brand Fund contributions that Franchisee owed to Franchisor during the period that Franchisee operated the Business.
The "average Royalty Fees and Brand Fund contributions that Franchisee owed to Franchisor" shall not be discounted or adjusted due to any deferred or reduced Royalty Fees and Brand Fund contributions set forth in an addendum to this Agreement, unless this Section 18(r) is specifically amended in such addendum.
Franchisee acknowledges that a precise calculation of the full extent of Franchisor's damages under these circumstances is difficult to determine and the method of calculation of such damages
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Burneys Sweets More's 2025 Franchise Disclosure Document, a franchisee must pay liquidated damages if Burneys Sweets More terminates the franchise agreement due to the franchisee's default. Liquidated damages also apply if the franchisee attempts to terminate the agreement without proper authorization as defined in Section 17(f) of the agreement. This provision aims to compensate Burneys Sweets More for losses resulting from the early termination of the franchise agreement.
The liquidated damages are calculated as a lump sum, not a penalty. The amount is determined by multiplying two factors. The first factor is the average monthly Royalty Fees and Brand Fund contributions the franchisee owed to Burneys Sweets More during the 52-week period before the franchisee stopped operating the business. If the franchisee operated for less than 52 weeks, the average is calculated based on the period they were in operation. The second factor is the lesser of 104 or the number of weeks remaining in the franchise agreement's term.
This calculation provides Burneys Sweets More with a predictable method for recouping potential losses from a terminated franchise. It is important to note that any deferred or reduced Royalty Fees and Brand Fund contributions outlined in an addendum to the agreement will not be considered unless the liquidated damages section is specifically amended in that addendum. This ensures that Burneys Sweets More calculates damages based on the standard fees, not any temporary reductions.
For a prospective Burneys Sweets More franchisee, this clause highlights the financial implications of defaulting on the franchise agreement or improperly terminating it. Understanding this calculation is crucial for assessing the potential financial risks associated with the franchise. Franchisees should carefully review Section 17(f) to understand the conditions under which they are permitted to terminate the agreement without incurring these damages.