How are 'Lost Revenue Damages' calculated if a Cicis franchise agreement is terminated due to the franchisee's breach or without cause by the franchisee?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
If we terminate this Agreement because of your breach or if you terminate this Agreement without cause, you and we agree that it would be difficult, if not impossible, to determine the amount of damages that we would suffer due to the loss or interruption of the revenue stream we otherwise would have derived from your continued payment of Royalty Fees, and that the Fund and Cooperatives would have otherwise derived from your continued contributions to those funds, through the remainder of the Term.
Therefore, you and we agree that a reasonable estimate of such damages, less any cost savings we might have experienced (the "Lost Revenue Damages"), is an amount equal to the net present value of the Royalty Fees, Fund Contributions and Minimum Cooperative Contributions that would have become due had this Agreement not been terminated, from the last date of regular operations of your Restaurant in compliance with this Agreement to the earlier of: (a) 104 weeks following the termination of the Agreement, or (b) the originally scheduled expiration of the Term (the "Measurement Period").
For the purposes of this Section, Lost Revenue Damages shall be calculated as
follows: (1) the number of weeks in the Measurement Period, multiplied by (2) the aggregate of the Royalty Fee, Fund Contribution and Minimum Cooperative Contribution percentages, multiplied by (3) the average weekly Net Sales of your Restaurant during the 52 full weeks months immediately preceding the last date of regular operations of your Restaurant in compliance with this Agreement; provided, that if as of the last date of regular operations of your Restaurant, your Restaurant has not been operating for at least 52 calendar weeks, the average weekly Net Sales of all Cicis Restaurants operating under the Marks during the entirety of our fiscal year immediately preceding the termination date or, as applicable the closing date.
You agree to pay us Lost Revenue Damages, as calculated in accordance with this Section, within 15 days after this Agreement expires or is terminated, or on any later date that we determine. You and we agree that the calculation described in this Section is a calculation only of the Lost Revenue Damages and that nothing herein shall preclude or limit us from proving and recovering any other damages caused by your breach of the Agreement.
Source: Item 22 — CONTRACTS (FDD pages 64–65)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, the calculation of 'Lost Revenue Damages' comes into play if the franchise agreement is terminated either due to the franchisee's breach or if the franchisee terminates the agreement without a valid cause. In such cases, Cicis and the franchisee agree that determining the exact amount of damages to Cicis due to the loss of royalty fees, fund contributions, and cooperative contributions would be difficult. Therefore, a pre-agreed estimate is used.
The 'Lost Revenue Damages' are calculated as the net present value of the Royalty Fees, Fund Contributions, and Minimum Cooperative Contributions that Cicis would have received had the agreement remained in effect. This calculation spans from the last date of regular operations of the restaurant to the earlier of either 104 weeks following the termination or the originally scheduled expiration of the agreement, which is termed the 'Measurement Period'.
The specific formula involves multiplying the number of weeks in the Measurement Period by the aggregate of the Royalty Fee, Fund Contribution, and Minimum Cooperative Contribution percentages. This result is then multiplied by the average weekly Net Sales of the restaurant over the 52 full weeks immediately preceding the last date of regular operations. If the restaurant hasn't been operating for at least 52 weeks, the average weekly Net Sales of all Cicis restaurants during the entirety of Cicis's fiscal year immediately preceding the termination date is used instead. The franchisee is obligated to pay these Lost Revenue Damages within 15 days after the agreement's termination, or on a later date determined by Cicis. It is important to note that this calculation only covers Lost Revenue Damages and does not prevent Cicis from pursuing additional damages caused by the franchisee's breach of the agreement.