What is the stated reason for City Publications using a lump sum payment as liquidated damages?
City_Publications Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — RECEIPT (FDD pages 39–129)
What This Means (2025 FDD)
According to City Publications' 2025 Franchise Disclosure Document, the lump sum payment required upon termination due to franchisee default is considered liquidated damages, not a penalty. City Publications states that calculating the full extent of damages it would incur due to a franchisee's premature termination is difficult to determine precisely.
To address this difficulty, City Publications aims to provide certainty by establishing a predetermined lump sum payment. This payment is designed to be a reasonable estimate of the damages City Publications will incur because of the early termination of the franchise agreement.
The liquidated damages are 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. It is important to note that this payment does not exclude City Publications from pursuing other available remedies, including attorneys' fees and costs.