Does the Care Plus Medical Ucc agreement specify that liquidated damages are considered a penalty?
Care_Plus_Medical_Ucc Franchise · 2024 FDDAnswer from 2024 FDD Document
- 14.5 Liquidated Damages. If Care Plus Medical UCC 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 Care Plus Medical UCC 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 Care Plus Medical UCC 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 Marketing Fund Contributions that Franchisee owed to Care Plus Medical UCC during the period that Franchisee operated the Business.
The "average Royalty Fees and Marketing Fund Contributions that Franchisee owed to Care Plus Medical UCC" shall not be discounted or adjusted due to any deferred or reduced Royalty Fees and Marketing Fund Contributions set forth in an addendum to this Agreement, unless this Section 14.5 is specifically amended in such addendum.
Franchisee acknowledges that a precise calculation of the full extent of Care Plus Medical UCC's damages under these circumstances is difficult to determine and the method of calculation of such damages as set forth in this Section is reasonable.
Franchisee's payment to Care Plus Medical UCC under this Section will be in lieu of any direct monetary damages that Care Plus Medical UCC may incur as a result of Care Plus Medical UCC's loss of Royalty Fees and Marketing Fund Contributions that would have been owed to Care Plus Medical UCC after the date of termination; however, such payment shall be in addition to all damages and other amounts arising under Section 14.3 and Section 14.4, Care Plus Medical UCC's right to injunctive relief for enforcement of Article 13, and any attorneys' fees and other costs and expenses to which Care Plus Medical UCC is entitled under this Agreement.
Source: Item 22 — CONTRACTS (FDD page 41)
What This Means (2024 FDD)
According to the 2024 Care Plus Medical Ucc Franchise Disclosure Document, the franchise agreement addresses liquidated damages in the event of termination due to the franchisee's default. Specifically, the agreement states that if Care Plus Medical Ucc terminates the agreement because of the franchisee's default, the franchisee must pay a lump sum to Care Plus Medical Ucc. This lump sum is explicitly defined as liquidated damages and is not considered a penalty.
The liquidated damages are calculated based on a formula that considers the average Royalty Fees and Marketing Fund Contributions owed by the franchisee. This average is taken over either the 52-week period preceding the termination or, if the business has operated for less than 52 weeks, the entire period of operation. This average is then multiplied by the lesser of 104 or the number of weeks remaining in the current term of the agreement.
The Care Plus Medical Ucc franchise agreement acknowledges that precisely calculating the full extent of damages is difficult, and therefore, the method used to calculate liquidated damages is deemed reasonable. This payment covers the loss of Royalty Fees and Marketing Fund Contributions that Care Plus Medical Ucc would have received after the termination date. However, it is in addition to other damages and amounts arising from specific sections of the agreement, such as those related to injunctive relief and attorney's fees.