Does the City Publications Franchise Agreement contain a liquidated damages clause?

Yes, according to City Publications' 2025 Franchise Disclosure Document, Section 19E of the Franchise Agreement contains a liquidated damages clause. The FDD also notes that under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable. This means that while the agreement includes a clause that stipulates a predetermined amount of damages in the event of a breach, its enforceability may be limited, particularly in California.

For a prospective City Publications franchisee, this information is crucial because it highlights a specific aspect of the franchise agreement that could have significant legal and financial implications. Liquidated damages clauses are designed to provide a clear and predictable remedy for the franchisor if the franchisee violates the agreement. However, the enforceability of such clauses can vary by state, as noted with the reference to California law.

Therefore, a potential franchisee should seek legal counsel to fully understand the implications of Section 19E, especially concerning the specific state laws that govern the franchise agreement. This will help the franchisee understand their rights and obligations and assess the potential financial risks associated with the liquidated damages clause. It is also important to note that the enforceability of such a clause can depend on whether the predetermined damages are a reasonable estimate of the actual harm suffered by the franchisor, rather than a penalty.