What sums are due to Caring Transitions upon termination due to a franchisee's default?
Caring_Transitions Franchise · 2025 FDDAnswer from 2025 FDD Document
r willful misconduct of Franchisor's employees).
13.5 Liquidated Damages.
- (a) If Franchisor terminates this agreement before the Expiration Date due to a default by Franchisee (including its abandonment of the Franchised Business), or if Franchisee terminates this agreement before the Expiration Date (which will also constitute a default under this agreement), Franchisee shall pay Franchisor, within fifteen days after the effective date of the termination and in addition to the other amounts specified in Article 5 and section 14.1(j), liquidated damages equal to the average monthly Royalty and Branding Fee payable by Franchisee during the twelve months immediately preceding the effective date of the termination, multiplied by the number of months between the effective date of the termination and the Expiration Date.
- (b) Franchisor and Franchisee acknowledge and agree that it would be impracticable to precisely determine the amount of damages Franchisor will incur as a result of this agreement's early termination. Some of those damages include loss of Royalties and Branding Fees, loss of goodwill, loss of representation in the market, consumer confusion, and expenses that Franchisor will incur to recruit, train and support a new franchisee for the market (collectively, "Brand Damages"). Franchisor and Franchisee acknowledge that Brand Damages are difficult to estimate accurately, and proof of Brand Damages would be burdensome and costly, although such damages are real and meaningful to Franchisor. Franchisor and Franchisee agree that this liquidated damages provision is a reasonable, good faith pre-estimate of those damages. Franchisee's payment of the liquidated damages to Franchisor will not be considered a penalty but, rather, a reasonable estimate of fair compensation to Franchisor for the Brand Damages it will incur because this agreement did not continue for the full length of the Initial Term due to Franchisee's default. Franchisee acknowledges that its payment of liquidated damages is full compensation to Franchisor only for the Brand Damages resulting from the early termination of this agreement and is in addition to, and not in lieu of, Franchisee's obligations to pay other amounts due Franchisor under this agreement as of the effective date of the termination, and to comply strictly with the Post-Termination Provisions. Franchisee further acknowledge that this liquidated damages provision does not cover any other damages to which Franchisor might be entitled as a result of Franchisee's actions or inaction.
- 13.6 Liability for Breach. If Franchisee fails to cure any breach within the applicable time period set forth in Section 13.2 above, Franchisee shall pay to Franchisor all damages, costs and expenses incurred by Franchisor as a result of any such breach, including, but not limited to, reasonable attorney and accounting fees. This provision shall apply regardless of whether or not Franchisor exercises its right to terminate this Agreement.
ARTICLE 14
OBLIGATIONS UPON TERMINATION
- 14.1 Franchisee's Obligations. Upon the termination or expiration of this agreement for any reason, Franchisee shall forthwith:
- (a) Cease to operate the franchised business and shall not thereafter, directly or indirectly, represent to the public or hold itself out as a present or former franchisee of Franchisor.
- (b) Except as may be authorized under another franchise agreement in effect between Franchisee and Franchisor, Franchisee shall immediately and permanently cease all use of the Marks and any derivative or confusingly similar variation thereof.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 41–49)
What This Means (2025 FDD)
According to Caring Transitions' 2025 Franchise Disclosure Document, if the franchise agreement is terminated before the expiration date due to a franchisee's default, the franchisee must pay Caring Transitions liquidated damages. These damages are calculated as the average monthly Royalty and Branding Fee payable by the franchisee during the twelve months immediately preceding the termination date, multiplied by the number of months remaining between the termination date and the original expiration date. This payment is due within fifteen days of the termination date and is in addition to other amounts specified in Article 5 and section 14.1(j) of the agreement.
Caring Transitions emphasizes that these liquidated damages are designed to compensate for losses such as loss of Royalties and Branding Fees, loss of goodwill, loss of market representation, consumer confusion, and the expenses associated with recruiting and training a new franchisee. The FDD states that these "Brand Damages" are difficult to estimate precisely, making a liquidated damages provision a reasonable approach. The franchisee acknowledges that this payment is not a penalty but a fair estimate of the compensation due to Caring Transitions for the early termination of the agreement.
Furthermore, the franchisee is responsible for all damages, costs, and expenses incurred by Caring Transitions as a result of any breach that leads to termination, including reasonable attorney and accounting fees. This obligation applies whether or not Caring Transitions chooses to terminate the agreement. Additionally, if Caring Transitions opts to operate the franchise business during the period of default, the franchisee must pay a management fee of $500 per day and reimburse all reasonable expenses incurred by Caring Transitions, including personnel costs for supervision, staffing, travel, food, and lodging. These fees and expenses are payable within ten days of invoicing through the EDT Account.