What section of the Caring Senior Service franchise agreement discusses liquidated damages?
Caring_Senior_Service Franchise · 2025 FDDAnswer from 2025 FDD Document
The Franchise Agreement contains a liquidated damages clause. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
The parties hereto acknowledge and agree that it would be impracticable to determine precisely the damages we 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, we 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 this liquidated damages provision to be a reasonable, good faith preestimate of those damages.
The liquidated damages provision only covers our damages from the loss of cash flow from the Royalty Fees. It does not cover any other damages, including damages to our reputation with the public and landlords and damages arising from a violation of any provision of this Agreement other than the
Royalty Fee section. You and each of your owners agree that the liquidated damages provision does not give us an adequate remedy at law for any default under, or for the enforcement of, any provision of this Agreement other than the Royalty Fee section.
Source: Item 9 — FRANCHISEE'S OBLIGATIONS (FDD pages 23–24)
What This Means (2025 FDD)
According to the 2025 Caring Senior Service FDD, the franchise agreement contains a liquidated damages clause. Specifically, an addendum to Item 17 of the Franchise Disclosure Document notes that under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
Article 15 of the Caring Senior Service franchise agreement also touches on damages related to termination. It states that it would be impracticable to determine precisely the damages Caring Senior Service would incur from the agreement's termination and the loss of cash flow from Royalty Fees. This is due to the complications of determining potential cost savings and how much the Royalty Fees would have grown over the remaining term of the agreement. The parties involved consider this liquidated damages provision to be a reasonable, good faith pre-estimate of those damages.
However, the liquidated damages provision only covers Caring Senior Service's damages from the loss of cash flow from the Royalty Fees. It does not cover any other damages, including damages to their reputation with the public and landlords, and damages arising from a violation of any provision of the agreement other than the Royalty Fee section. The franchisee and their owners agree that the liquidated damages provision does not give Caring Senior Service an adequate remedy at law for any default under, or for the enforcement of, any provision of the agreement other than the Royalty Fee section.
Prospective franchisees should carefully review Article 15 and Item 17 within the FDD and franchise agreement with a legal professional to fully understand the implications of the liquidated damages clause, especially regarding its enforceability and limitations, and how it applies in states like California.