Does the Chocolate Bash franchise agreement allow for punitive damages in a controversy or claim?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
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Attachment 6 to Franchise Agreement
STATE ADDENDA TO THE FRANCHISE AGREEMENT
FOR THE STATE OF CALIFORNIA
This Addendum to the Franchise Agreement is agreed to this day of, 20, is by and between Chocolate Bash Franchising LLC and
- New Section 17.6 is inserted into the Franchise Agreement and states as follows:
If termination is the result of Franchisee's default, Franchisee will pay to Franchisor a lump sum payment (as liquidated damages for causing the premature termination of this Agreement and not as a penalty) equal to the total of all Royalty Fee payments for: (a) the twenty-four (24) calendar months of operation of Franchisee preceding Franchisee's default; (b) the period of time Franchisee has been in operation preceding the notice, if less than twenty-four (24) calendar months, projected on a twenty-four (24) calendar month basis; or (c) any shorter period as equals the unexpired term at the time of termination.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to the 2024 Chocolate Bash Franchise Disclosure Document, the franchise agreement includes a section specific to California franchisees regarding termination and damages. If a Chocolate Bash franchisee in California defaults and the agreement is terminated, the franchisee will be required to pay a lump sum to Chocolate Bash Franchising LLC. This lump sum is considered liquidated damages for the premature termination of the agreement and not as a penalty.
The amount is calculated based on royalty fee payments. It will be equal to the total of all Royalty Fee payments for: (a) the twenty-four (24) calendar months of operation preceding the default; (b) if the operation was less than 24 months, it will be projected on a 24-month basis; or (c) any shorter period that equals the unexpired term at the time of termination. The agreement specifies that calculating the full extent of damages to Chocolate Bash upon termination due to franchisee default is difficult to determine precisely. Therefore, the parties agree that this lump sum payment is a reasonable estimate of damages for premature termination.
It is important to note that this payment does not exclude Chocolate Bash from pursuing other remedies, including attorneys' fees and costs. Additionally, California Civil Code Section 1671 states that certain liquidated damages clauses are unenforceable, so there may be some stipulations that are not enforceable under California Law. This addendum is specific to California and may not apply to franchisees in other states.