Under what circumstances will a City Publications franchisee be required to pay liquidated damages?
City_Publications Franchise · 2025 FDDAnswer from 2025 FDD Document
- Section 19E of the Franchise Agreement contains a liquidated damages clause.
Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
The parties recognize that the success of the Franchise System is dependent upon the best efforts of each franchisee in its Exclusive Territory. Franchisee must generate one 50,000 circulation card pack in the first mailing zone as defined within the territory for the first nine months; each consecutive year thereafter, franchisee must generate at least four 50,000 circulation cards packs in each zone. Beginning of the fourth year, Franchisee must generate at least five 50,000 circulation cards packs in each zone. If franchisee fails to do the required five mailings, Franchisee owes Franchisor $2,500 per zone for each mailing missed. If Franchisee fails to pay that amount upon receipt of billing for same, Franchisor can terminate this Agreement.
Source: Item 23 — RECEIPT (FDD pages 39–129)
What This Means (2025 FDD)
According to the 2025 City Publications Franchise Disclosure Document, Section 19E of the Franchise Agreement contains a liquidated damages clause. However, the FDD also notes that under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable. This means that while the franchise agreement may include a clause requiring franchisees to pay liquidated damages under certain circumstances, the enforceability of such a clause may be limited by California law.
Additionally, the success of the City Publications franchise system depends on each franchisee's best efforts within their exclusive territory. Franchisees must generate one 50,000 circulation card pack in the first mailing zone within the first nine months. Each consecutive year, franchisees must generate at least four 50,000 circulation cards packs in each zone. Beginning in the fourth year, franchisees must generate at least five 50,000 circulation cards packs in each zone. If a franchisee fails to complete the required five mailings, they owe City Publications $2,500 per zone for each mailing missed. If the franchisee fails to pay this amount after billing, City Publications can terminate the agreement.
In practical terms, a prospective City Publications franchisee should carefully review Section 19E of the Franchise Agreement to understand the specific circumstances under which liquidated damages may be assessed. They should also be aware of the annual minimum performance requirements, as failure to meet these requirements can result in owing City Publications $2,500 per zone for each mailing missed. Given the potential unenforceability of certain liquidated damages clauses under California law, franchisees, particularly those in California, should consult with legal counsel to understand their rights and obligations under the Franchise Agreement.