Is the liquidated damages payment the only remedy Caring Transitions has for a Covenantor's breach?
Caring_Transitions Franchise · 2025 FDDAnswer from 2025 FDD Document
The parties agree that the full extent of the damages that Franchisor will incur if a Covenantor fails to comply with their obligations under section 3 or 4 is difficult to ascertain, but the parties nevertheless desire certainty in this matter.
Accordingly, if a Covenantor breaches or fails to comply with any of the provisions of section 3 or 4, they shall pay Franchisor, as liquidated damages and not as a penalty, a royalty equal to 15% of the gross amount of all income, sales, salary, wages, fees, dividends, distributions, and other compensation received or earned by Covenantor or any Covered Person, or to which any of those parties becomes entitled, as the result of the breach or noncompliance.
The parties further agree that the royalty required by this paragraph is reasonable in light of the damages that Franchisor will incur.
This payment is not exclusive of any other remedies that Franchisor may have, including equitable remedies, attorneys' fees, and costs.
Source: Item 23 — RECEIPT (FDD pages 49–202)
What This Means (2025 FDD)
According to Caring Transitions' 2025 Franchise Disclosure Document, the liquidated damages payment is not the only remedy available to the franchisor for a Covenantor's breach of obligations. While the document specifies a liquidated damages payment equal to 15% of the gross amount of all income, sales, salary, wages, fees, dividends, distributions, and other compensation received or earned by the Covenantor or any Covered Person, it explicitly states that this payment does not exclude other remedies.
Caring Transitions retains the right to pursue other remedies, including equitable remedies, attorneys' fees, and costs. Additionally, the Covenantor acknowledges that violating the covenants would cause irreparable injury to Caring Transitions and the franchisee, potentially leading to injunctive relief. This means Caring Transitions can seek a court order to stop the Covenantor from engaging in prohibited conduct, and the Covenantor agrees to cover all associated court costs and attorney fees.
This provision is significant for prospective Caring Transitions franchisees because it clarifies the extent of potential liabilities and obligations. A Covenantor's breach can trigger not only the liquidated damages payment but also additional legal actions and financial burdens. The availability of injunctive relief further underscores the seriousness with which Caring Transitions views compliance with the covenants, particularly those related to competition and confidential information. Franchisees should carefully review these sections of the franchise agreement to fully understand their responsibilities and the potential consequences of non-compliance.