Under what conditions is the liquidated brand damages fee incurred 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, a liquidated brand damages fee of $10,000 is incurred if a franchisee 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 the Chesters brand, as defined in the franchise agreement's non-competition clauses, they will be required to pay this $10,000 fee. Non-competition clauses are common in franchise agreements to protect the brand's market share and prevent franchisees from using the franchisor's confidential information and business model to operate a competing business during or after the franchise term.
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 triggering the liquidated brand damages fee. Franchisees should also seek legal counsel to ensure they fully understand their obligations under the franchise agreement.