Is the non-compliance fee charged by Chocolate Bash a penalty?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
to the vendor. If CB Franchising does so, it may impose a reasonable markup or charge for administering the payment program.
- 4.8 Non-Compliance Fee. CB Franchising may charge Franchisee $500 for any instance of non-compliance with the System Standards or this Agreement (other than Franchisee's nonpayment of a fee owed to CB Franchising) which Franchisee fails to cure after 30 days' notice. Thereafter, CB Franchising may charge Franchisee $250 per week until Franchisee ceases such non-compliance. This fee is a reasonable estimate of CB Franchising's internal cost of personnel time attributable to addressing the non-compliance, and it is not a penalty or estimate of all damages arising from Franchisee's breach. The non-compliance
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, the non-compliance fee is not considered a penalty. Chocolate Bash may charge a franchisee $500 for each instance of non-compliance with the System Standards or the Franchise Agreement, provided it is not related to non-payment of fees owed to Chocolate Bash. This fee applies if the franchisee fails to correct the non-compliance within 30 days of receiving notice.
Thereafter, if the non-compliance continues, Chocolate Bash may charge the franchisee $250 per week until the issue is resolved. The FDD states that these fees are a reasonable estimate of Chocolate Bash's internal costs related to addressing the non-compliance, specifically personnel time.
The non-compliance fee is in addition to any other rights and remedies Chocolate Bash may have, including default and termination of the agreement. This means that in addition to the fees, Chocolate Bash can pursue other actions if the franchisee breaches the agreement.