Under what circumstances is the Liquidated Brand Damages fee due 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 6 — OTHER FEES (FDD pages 14–16)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, a Liquidated Brand Damages fee of $10,000 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 incurred as needed.
This means that if a Chesters franchisee or their owners engage in activities that compete with Chesters, as defined in the non-competition clauses of the franchise agreement, they will be required to pay this $10,000 fee. The specific activities that constitute a violation of the non-competition restrictions are detailed in Items 17(q) and (r), which cover the scope and duration of these restrictions both during and after the franchise term.
Prospective franchisees should carefully review Items 17(q) and (r) of the Chesters franchise agreement to fully understand the scope of the non-competition restrictions. Understanding these restrictions is crucial to avoid inadvertently triggering the Liquidated Brand Damages fee. Franchisees should seek legal counsel to clarify any ambiguities or concerns regarding these clauses before signing the agreement.
It is common for franchise agreements to include non-competition clauses to protect the brand and market share of the franchisor. These clauses typically restrict franchisees from operating similar businesses within a certain geographic area and for a specific period, both during and after the franchise agreement. The Liquidated Brand Damages fee serves as a deterrent against violating these restrictions and provides compensation to Chesters for potential damages resulting from such violations.