How is the termination fee calculated for the Camp Margaritaville agreement?
Camp_Margaritaville Franchise · 2025 FDDAnswer from 2025 FDD Document
termination.
Section 16.04 Technology Services. Upon expiration or termination of this Agreement, Franchisee must cease use of the CRS, or any other technology connected to the Camp Margaritaville System, including, but not limited to the CRM System, PMS, POS System, employee performance platform and CMS. Franchisee, however, shall remain obligated to any third parties for payments due and owing under any separate agreement for services that they may have with such third-party vendors.
Section 16.05 Liquidated Damages.
- (a) Upon the termination of this Agreement under Section 14.01 by Franchisor, Franchisee shall pay to Franchisor an amount equal to $50,000 multiplied by the lesser of: (i) the remainder of months in the Term or (ii) 36 months. The Parties agree that the foregoing amount shall be considered liquidated damages and not a penalty, because the money damages under this Section 16.05 would be difficult or impossible to accurately estimate and the foregoing amount is a commercially reasonable pre-estimate of the probable loss to Franchisor at the applicable time and shall constitute full and complete satisfaction of all obligations of Franchisee under this Agreement.
- (b) Notwithstanding any other provision of this Agreement, if the Resort has not yet opened for business as of the Opening Deadline (as may be extended pursuant to Section 2.08(b)), then Franchisee shall pay to Franchisor an amount equal to $500,000. The Parties agree that the foregoing amount shall be considered liquidated damages and not a penalty, because the money damages under this Section 16.05 would be difficult or impossible to accurately estimate and the foregoing amount is a commercially reasonable pre-estimate of the probable loss to Franchisor at the applicable time and shall constitute full and complete satisfaction of all obligations of Franchisee under this Agreement.
Section 16.06 Actual Damages Under Special Circumstances. Franchisee acknowledges that certain defaults under this Agreement have the potential to materially denigrate the value of the Camp Margaritaville Intellectual Property and negatively impact consumer confidence in the Camp Margaritaville System, such that F
Source: Item 23 — RECEIPTS (FDD pages 72–406)
What This Means (2025 FDD)
According to the 2025 Camp Margaritaville FDD, the method for calculating the termination fee depends on the circumstances of the termination. If Camp Margaritaville terminates the agreement due to franchisee default as per Section 14.01, the franchisee must pay Camp Margaritaville an amount equal to $50,000 multiplied by the lesser of (i) the remaining months in the term or (ii) 36 months. This is considered liquidated damages, not a penalty, meant to represent a reasonable pre-estimate of the probable loss to Camp Margaritaville.
However, if the Camp Margaritaville resort has not opened by the opening deadline, even with any extensions, the franchisee will have to pay Camp Margaritaville $500,000. This amount is also considered liquidated damages and not a penalty.
Camp Margaritaville retains the right to seek actual damages in addition to liquidated damages under special circumstances. These circumstances include the agreement being terminated due to the franchisee's willful default, such as failing to operate the resort according to the agreement, or if the agreement is terminated because of a transfer to a competing brand. This indicates that Camp Margaritaville aims to protect its brand value and consumer confidence, and may pursue additional compensation if these are significantly harmed by a franchisee's actions.