How is the liquidated damages amount calculated by Cinch I.T.?
Cinch_I_T Franchise · 2024 FDDAnswer from 2024 FDD Document
| TYPE OF FEE1 | AMOUNT | DUE DATE | REMARKS |
|---|---|---|---|
| Liquidated Damages | Will vary under the circumstances | If Franchise Agreement is terminated as a result of your default | A lump sum equal to the value of the Royalty and Marketing Fees that you would have paid for the remainder 5 of the term. |
- (5) Royalty Fees and Marketing Fund Fees will be calculated based on the Franchised Business' average monthly Gross Sales for the 12 months preceding the termination date. If you have not operated your Franchised Business for at least 12 months preceding the termination date, Royalty Fees and Marketing Fund Fees will be calculated based on the average monthly Gross Sales of franchised businesses operating under the same trademark during our last fiscal year.
Source: Item 6 — OTHER FEES (FDD pages 14–20)
What This Means (2024 FDD)
According to Cinch I.T.'s 2024 Franchise Disclosure Document, liquidated damages are calculated based on the remaining term of the franchise agreement. If the Franchise Agreement is terminated due to the franchisee's default, Cinch I.T. will charge a lump sum.
The liquidated damages amount is equivalent to the total Royalty and Marketing Fees that the franchisee would have been expected to pay for the remainder of the 5-year franchise term. This calculation is based on the average monthly Gross Sales for the 12 months preceding the termination date.
However, if the Cinch I.T. franchisee has not operated their franchise for at least 12 months before termination, the calculation will instead use the average monthly Gross Sales of other Cinch I.T. franchises operating under the same trademark during the franchisor's last fiscal year. This ensures that there is a basis for calculating potential lost revenue even for newer franchises.