Under what condition are early termination damages payable by a Chicken Guy franchisee?

According to Chicken Guy's 2025 Franchise Disclosure Document, early termination damages are payable if a franchisee defaults on their obligations, leading Chicken Guy to terminate the Franchise Agreement before the end of its initial term. The amount of these damages is calculated by multiplying the average weekly Royalty Fees owed by the franchisee for the one-year period prior to termination by the lesser of 104 weeks or the number of weeks remaining in the term of the Franchise Agreement. This payment is due within 30 days following the termination.

This clause is a fairly standard practice in franchising, designed to compensate the franchisor for lost future royalty revenue when a franchisee fails to meet their contractual obligations. The calculation method ensures that the damages are proportional to the franchisee's past performance and the remaining duration of the agreement. It's important to note that the franchisee's liability is capped at 104 weeks, even if the remaining term is longer, which could potentially mitigate the financial impact.

Prospective Chicken Guy franchisees should carefully consider this early termination clause and understand the circumstances under which it could be invoked. Defaulting on obligations can trigger this significant financial penalty, so franchisees must be prepared to meet all requirements outlined in the Franchise Agreement. It would be prudent to seek legal counsel to fully understand the implications of this clause and to assess the risks associated with early termination.