Is the non-compliance fee for a Chocolate Bash franchise considered 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 the 2024 Chocolate Bash Franchise Disclosure Document, the non-compliance fee is not considered a penalty. The FDD states that Chocolate Bash may charge a franchisee $500 for any instance of non-compliance with the System Standards or the Franchise Agreement, excluding nonpayment of fees owed to Chocolate Bash, if the franchisee fails to correct the issue after 30 days' notice.
Thereafter, Chocolate Bash may charge the franchisee $250 per week until the non-compliance ceases. The document explicitly states that this fee is a reasonable estimate of Chocolate Bash's internal personnel costs associated with addressing the non-compliance and is not a penalty or an estimate of all damages resulting from the franchisee's breach.
This non-compliance fee is in addition to any other rights and remedies Chocolate Bash may have, including default and termination rights under Section 14.2 of the agreement. This means that a Chocolate Bash franchisee could face both the non-compliance fees and further actions from the franchisor if the non-compliance continues or is severe enough to warrant additional measures.