Is the non-refundable deposit considered a penalty if a Coffee News franchisee terminates the agreement within the initial period?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee shall have the right to terminate this Agreement within the Initial Period covered by the non-refundable deposit, in which case the non-refundable deposit shall be forfeited to Franchisor as liquidated damages and not as a penalty. Any termination by Franchisee shall have no effect upon Franchisee's obligation to pay the non-refundable deposit due in accordance with subparagraph 2.1(a) and/or Schedule A.
Source: Item 23 — Receipts (FDD pages 36–118)
What This Means (2025 FDD)
According to the 2025 Coffee News Franchise Disclosure Document, if a franchisee terminates the agreement within the initial period covered by the non-refundable deposit, the deposit will be forfeited to Coffee News as liquidated damages, and it will not be considered a penalty. This means that the franchisee will not receive the deposit back.
This policy is further reinforced by the agreement stating that any termination by the franchisee will not affect their obligation to pay the non-refundable deposit. This clause ensures that Coffee News retains the deposit regardless of when the franchisee decides to terminate the agreement, as long as it is within the initial period.
For a prospective Coffee News franchisee, this means that the non-refundable deposit is at risk from the moment the agreement is signed. It is crucial to carefully consider all aspects of the franchise opportunity and conduct thorough due diligence before committing to the agreement, as early termination will result in the loss of this deposit. Franchisees should be fully aware of the conditions under which they can terminate the agreement and the financial implications of doing so.