Under what conditions is the Chesters liquidated brand damages fee incurred?
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 | $10,000 | As incurred | Due if you or your owners violate non-competition restrictions described in Items 17(q) and (r). |
| Damages |
Source: Item 6 — OTHER FEES (FDD pages 14–16)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, a franchisee may incur a liquidated brand damages fee of $10,000 if they or their owners violate the non-competition restrictions detailed in Items 17(q) and (r) of the FDD. This fee is due as incurred.
This means that if a Chesters franchisee or their owners engage in activities that compete with Chesters, as defined in the franchise agreement's non-competition clauses, they will be required to pay this fee. Non-competition clauses are common in franchise agreements to protect the brand's market share and confidential information. These clauses typically restrict franchisees from operating similar businesses during the term of the franchise agreement and for a certain period after the agreement ends, within a specific geographic area.
Prospective franchisees should carefully review Items 17(q) and (r) of the Chesters FDD to fully understand the scope and limitations of the non-competition restrictions. Understanding these restrictions is crucial to avoid inadvertently violating the agreement and incurring the $10,000 liquidated brand damages fee. Franchisees should also seek legal counsel to clarify any ambiguities or concerns regarding these clauses before signing the franchise agreement.
It is important to note that the liquidated damages fee is in addition to any other legal remedies that Chesters may pursue for breach of the non-competition agreement. This could include seeking an injunction to stop the franchisee from engaging in the prohibited activities or pursuing monetary damages to compensate Chesters for any losses suffered as a result of the breach.