In the liquidated damages calculation for a terminated Churchs Chicken franchise, what constitutes 'x' if the restaurant has not operated for at least 52 weeks?
Churchs_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
If Cajun terminates this Agreement, Franchisee shall pay to Cajun a lump sum (as liquidated damages and not as a penalty) as compensation for the early closure of the Restaurant calculated as follows: (x) the average weekly Royalty Fees and advertising contributions that Franchisee owed to Cajun under this Agreement for the 52-week period preceding the earlier of the closure of the Restaurant or the effective date of termination; multiplied by (y) the lesser of (1) 208 or (2) the number of weeks remaining in the then-current term of this Agreement.
If Franchisee had not operated the Franchised Restaurant for at least 52 weeks, (x) shall equal the average weekly Royalty Fees and advertising contributions that Franchisee owed to Cajun during the period that Franchisee operated the Franchised Restaurant.
Source: Item 23 — RECEIPT (FDD pages 68–406)
What This Means (2025 FDD)
According to Churchs Chicken's 2025 Franchise Disclosure Document, the liquidated damages calculation following a termination takes into account the average weekly Royalty Fees and advertising contributions. If a Churchs Chicken restaurant has not been in operation for at least 52 weeks prior to termination, the calculation of 'x' changes.
In this case, 'x' will be equal to the average weekly Royalty Fees and advertising contributions that the franchisee owed to Churchs Chicken during the period that the franchisee actually operated the franchised restaurant. This means that the calculation will be based on the actual operating history of the restaurant, even if it's shorter than a year.
This is important for prospective franchisees to understand because it clarifies how liquidated damages are assessed if a restaurant closes relatively soon after opening. It ensures that the calculation is based on the actual financial performance during the operating period, rather than a potentially inflated or inaccurate estimate based on a full year.