What are 'Lost Revenue Damages' in the context of a terminated Cicis franchise agreement?
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, 'Lost Revenue Damages' are a financial penalty a franchisee may incur if the franchise agreement is terminated early due to the franchisee's breach or if the franchisee terminates the agreement without a valid reason. Cicis and the franchisee agree that calculating the exact damages from the lost revenue stream would be difficult.
To address this, the agreement stipulates a method for estimating these damages. The 'Lost Revenue Damages' are calculated as the net present value of Royalty Fees, Fund Contributions, and Minimum Cooperative Contributions that Cicis would have received had the agreement continued. This calculation covers the period from the restaurant's last day of compliant operation until either 104 weeks after termination or the originally scheduled end of the agreement term, whichever comes first.
The calculation involves multiplying the number of weeks in this 'Measurement Period' by the combined percentages of Royalty Fees, Fund Contributions, and Minimum Cooperative Contributions, and then multiplying that result by the average weekly Net Sales of the restaurant over the 52 weeks before its last regular operation. If the restaurant operated for less than 52 weeks, the average weekly Net Sales of all Cicis restaurants during the preceding fiscal year is used instead. The franchisee is required to pay these damages within 15 days of the agreement's termination, although Cicis reserves the right to specify a later date. It's important to note that this calculation only covers Lost Revenue Damages, and Cicis retains the right to pursue additional damages caused by the franchisee's breach of contract.