How does the Chesters training fee (Item 5) compare to the potential liquidated damages for violating non-competition agreements (Item 7)?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
You must pay us a $3,500 training fee in a lump sum when you sign the Agreement. The training fee is not refundable under any circumstances. During the 2024 fiscal year, the training fees we received from franchisees ranged from $0 to $3,500.
| 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. |
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, the initial training fee is $3,500. This fee is non-refundable and is due when the franchise agreement is signed. In contrast, the liquidated damages for violating non-competition restrictions are $10,000. This amount is due if a franchisee or their owners violate the non-competition restrictions outlined in Items 17(q) and (r) of the FDD.
The training fee covers the initial brand standard training program provided by Chesters to instruct franchisees and their employees on proper restaurant procedures and techniques. The liquidated damages, on the other hand, are intended to compensate Chesters for brand damages resulting from a franchisee operating a competitive business. These damages include lost market penetration, goodwill, customer confusion, and the costs associated with finding a new operator in the area.
Therefore, the potential liquidated damages for violating non-competition agreements are significantly higher than the initial training fee. Specifically, the liquidated damages are almost three times the amount of the initial training fee. This difference highlights the importance Chesters places on protecting its brand and market presence through non-competition agreements. Prospective franchisees should carefully consider the terms of these agreements and the potential financial consequences of violating them.
It is important to note that the training fee is a one-time, non-refundable payment, while the liquidated damages are only incurred if a franchisee violates the non-competition restrictions. The non-compete restrictions apply during the agreement term and prevent the franchisee or their owners from having an interest in or working for a Competitive Business at the Location or within a five (5)-mile radius from the Location.