Are liquidated damages and termination penalties allowed for Chop5 Salad Kitchen franchises in Indiana?
Chop5_Salad_Kitchen Franchise · 2024 FDDAnswer from 2024 FDD Document
In recognition of the requirements of the Indiana Franchise Disclosure Law, IC 23-2-2-2.5, the Franchise Agreement and Supplemental Agreements are amended as follows:
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- Liquidated damages and termination penalties are prohibited by law in the State of Indiana and, therefore, the Disclosure Document, the Franchise Agreement and Supplemental Agreements are amended by the deletion of all references to liquidated damages and termination penalties and the addition of the following language to the original language that appears therein:
Notwithstanding any such termination, and in addition to the obligations of the franchisee as otherwise provided, or in the event of termination or cancellation of the Franchise Agreement under any of the other provisions therein, the franchisee nevertheless shall be, continue and remain liable to franchisor for any and all damages which franchisor has sustained or may sustain by reason of such default or defaults and the breach of the Franchise Agreement on the part of the franchisee for the unexpired Term of the Franchise Agreement.
Source: Item 23 — RECEIPT (FDD pages 50–178)
What This Means (2024 FDD)
According to the 2024 Chop5 Salad Kitchen Franchise Disclosure Document, liquidated damages and termination penalties are prohibited by law in the State of Indiana. For any Chop5 Salad Kitchen franchise agreement issued in Indiana, the disclosure document, the franchise agreement, and supplemental agreements are amended to remove all references to liquidated damages and termination penalties.
However, even with the prohibition of liquidated damages and termination penalties, if a Chop5 Salad Kitchen franchisee in Indiana defaults or breaches the franchise agreement, they are still liable to the franchisor for any damages the franchisor sustains due to the franchisee's default or breach. This liability extends for the unexpired term of the franchise agreement.
This means that while Chop5 Salad Kitchen cannot impose pre-determined or fixed penalties for termination in Indiana, they retain the right to pursue actual damages incurred as a result of a franchisee's breach. This is a critical distinction for prospective franchisees to understand, as they could still face significant financial exposure if they fail to meet their contractual obligations.