Does the obligation to pay the royalty fee during the 'Damages Period' survive the termination of the Carls franchise agreement?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
The obligation to pay this royalty fee survives termination of this Agreement and is in addition to, and not in lieu of, Franchisee's obligation to fully comply with its obligations under Section 20.C. following termination of this Agreement.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to the 2024 Carls Franchise Disclosure Document, the obligation to pay the royalty fee during the 'Damages Period' does indeed survive the termination of the franchise agreement. This means that even after the agreement is terminated, the franchisee is still responsible for paying the royalty fee.
The 'Damages Period' is defined as the time from the termination date until the earlier of either the 3-year anniversary of the termination date or the date on which the initial term of the agreement was scheduled to expire. The royalty fee amount during this period is calculated by multiplying the average weekly royalty fee from the 52 weeks prior to termination by the number of weeks in the 'Damages Period'.
This obligation is in addition to the franchisee's responsibility to comply with obligations under Section 20.C of the agreement following termination, which includes returning all operational procedure manuals (OPM) and other materials furnished by Carls, as well as ceasing all use of proprietary marks. This continuation of royalty payments post-termination could represent a significant financial burden for a former franchisee, especially if the restaurant is no longer operational.