What is the amount of the liquidated brand damages fee for a Chesters franchise?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of fee* | Amount | Due Date | Remarks |
|---|---|---|---|
| Indemnification | Will vary under circumstances | As incurred | You must reimburse us if we are held liable for claims from your Restaurant’s operation or incur costs in defending them. |
| Liquidated Brand Damages | $10,000 | As incurred | Due if you or your owners violate non-competition restrictions described in Items 17(q) and (r). |
| De-Branding Fee | $10,000 | As incurred Payment is due by credit card or automatic debit | Due if you do not comply with payment and Restaurant-specific physical de-branding obligations within 14 business days after Agreement expires or is terminated. |
Source: Item 7 — **ESTIMATED INITIAL INVESTMENT (FDD pages 16–19)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, franchisees may incur a liquidated brand damages fee of $10,000. This fee is not refundable and is due if a franchisee or their owners violate the non-competition restrictions outlined in Items 17(q) and (r) of the Franchise Agreement. This fee is in addition to other potential costs, such as indemnification and de-branding fees, which are also listed in Item 7.
The liquidated brand damages fee is intended to protect Chesters's brand integrity and market position by discouraging franchisees from engaging in activities that compete with the franchise system, especially after the franchise agreement ends. Non-competition agreements are common in franchising to prevent franchisees from using the franchisor's trade secrets, customer relationships, and brand recognition to start a competing business.
Prospective franchisees should carefully review Items 17(q) and (r) of the Chesters Franchise Agreement to fully understand the scope and limitations of the non-competition restrictions. They should also consider the potential circumstances under which this $10,000 fee could be imposed and factor this risk into their financial planning. Understanding these restrictions is crucial for avoiding actions that could trigger the liquidated brand damages fee and ensuring compliance with the franchise agreement.