What specific fees are included in the lost revenues that Casiola can recover after termination?
Casiola Franchise · 2024 FDDAnswer from 2024 FDD Document
- (3) To hold Franchisee and Franchisee's Owners liable for, and recover from each of them, jointly and severally, lost revenues, profits, and fees including, but not limited to Royalty Fees, Brand Development Fund Fee, Advertising Contributions, and all other fees, revenues and/or expenses that would have been paid to Franchisor, under the terms of this Agreement and throughout the Term of this Agreement, had a breach not occurred and had Franchisor not terminated this Agreement. In calculating and determining the foregoing, Franchisee agrees that in calculating and in determining such damages that it is fair and reasonable to use Franchisee's most recent calendar year Gross Sales in calculating and determining Franchisor lost revenues and fees and by assuming that such Gross Sales would have been earned in each and every year throughout the remainder of the Term had this Agreement not been terminated. If, however, the Franchised Business has been open and in operation for less than one calendar year, Franchisee agrees that it is fair and reasonable to use an average of Casiola Business Gross Sales across the System during the year in which this Agreement was terminated and to use such average Gross Sales for the purpose of calculating and determining Franchisor lost revenues and fees and, in doing so, by assuming that such Gross Sales would have been earned in each and every year throughout the remainder of the Term had this Agreement not been terminated. Franchisee agrees that the foregoing is a form of liquidated damages, and that it is fair and reasonable.
Source: Item 23 — RECEIPTS (FDD pages 47–209)
What This Means (2024 FDD)
According to Casiola's 2024 Franchise Disclosure Document, in the event of a breach of the franchise agreement leading to termination, Casiola has the right to recover lost revenues, profits, and fees from the franchisee. These include, but are not limited to, Royalty Fees, Brand Development Fund Fee, Advertising Contributions, and all other fees, revenues and/or expenses that would have been paid to Casiola throughout the term of the agreement had the breach not occurred.
To calculate these lost revenues, Casiola may use the franchisee's most recent calendar year Gross Sales. If the business has been open for less than a year, Casiola can use the average Gross Sales of Casiola businesses across the system during the year of termination. This calculation assumes that the determined Gross Sales would have been earned each year for the remainder of the franchise term.
The franchise agreement states that the franchisee agrees that this method of calculating lost revenues is a fair and reasonable form of liquidated damages. This means that the franchisee acknowledges and accepts this method as a way to pre-determine damages in case of a breach, rather than having a court determine the amount. Prospective franchisees should understand that this clause could significantly impact their financial obligations if they fail to comply with the franchise agreement, leading to its termination.