Is the liquidated damages payment the only remedy available to City Publications in the event of a franchisee's default?
City_Publications Franchise · 2025 FDDAnswer from 2025 FDD Document
Certain Provisions**
All obligations of Franchisor and Franchisee which expressly or by their nature survive the expiration or termination of this Agreement shall continue in full force and effect subsequent to and notwithstanding their expiration or termination and until satisfied or by their nature expire.
E. Liquidated Damages
If termination is the result of Franchisee's default, Franchisee will pay to Franchisor a lump sum payment (as liquidated damages for causing the premature termination of this Agreement and not as a penalty) equal to the total of all Royalty Fee payments for: (a) the twenty-four (24) calendar months of operation of Franchisee preceding Franchisee's default; (b) the period of time Franchisee has been in operation preceding the notice, if less than twenty-four (24) calendar months, projected on a twenty-four (24) calendar month basis; or (c) any shorter period as equals the unexpired term at the time of termination. The parties agree that a precise calculation of the full extent of the damages that Franchisor will incur on termination of this Agreement as a result of Franchisee's default is difficult and the parties desire certainty in this matter and agree that the lump sum payment provided under this Section is reasonable in light of the damages for premature termination that Franchisor will incur. This payment is not exclusive of any other remedies that Franchisor may have including attorneys' fees and costs.
SECTION 20. TRANSFERABILITY OF INTEREST
A. By Franchisor
This Agreement and all rights hereunder can be assigned and transferred by Franchisor and, if so, shall be binding upon and inure to the benefit of Franchisor's successors and assigns; provided, however, that with respect to any assignment resulting in the subsequent performance by the assignee of the functions of Franchisor, the assignee shall assume the obligations of Franchisor hereunder.
**B.
Source: Item 23 — RECEIPT (FDD pages 39–129)
What This Means (2025 FDD)
According to City Publications' 2025 Franchise Disclosure Document, the liquidated damages payment is not the only remedy available to the franchisor in the event of a franchisee's default. In addition to the liquidated damages, City Publications retains the right to pursue other available remedies, including attorneys' fees and costs.
The FDD specifies that if a franchisee defaults and the franchise agreement is terminated, the franchisee must pay City Publications a lump sum as liquidated damages. This sum is calculated based on royalty fee payments, specifically the total of all royalty fee payments for either the 24 months preceding the default, a projection based on a shorter operational period, or a shorter period equaling the unexpired term at termination. The purpose of this payment is to compensate City Publications for the early termination of the agreement, and it is not intended as a penalty.
Furthermore, the franchise agreement states that City Publications is entitled to seek immediate equitable remedies, including restraining orders, preliminary and permanent injunctions, to prevent a franchisee from breaching the covenants outlined in Section 17 of the agreement. This section addresses actions like engaging in competitive businesses, soliciting employees, or soliciting customers, highlighting that breaches could cause irreparable harm to City Publications. The availability of these equitable remedies reinforces that liquidated damages are not the sole recourse for City Publications in cases of franchisee default.