How are liquidated damages calculated if Crave terminates my Franchise Agreement for cause?
Crave Franchise · 2025 FDDAnswer from 2025 FDD Document
If we terminate your Franchise Agreement for cause, you must pay us within 15 days after the effective date of termination liquidated damages equal to the average monthly Royalty Fees you paid or owed to us during the 12 months of operation preceding the effective date of termination multiplied by (a) 24 (being the number of months in two full years), or (b) the number of months remaining in the Agreement had it not been terminated, whichever is lower.
Source: Item 6 — OTHER FEES (FDD pages 12–19)
What This Means (2025 FDD)
According to Crave's 2025 Franchise Disclosure Document, if Crave terminates your Franchise Agreement for cause, you must pay liquidated damages. These damages are calculated based on the average monthly Royalty Fees you paid or owed during the 12 months before the termination date.
The liquidated damages will be equal to that average monthly Royalty Fee multiplied by either 24 (representing two full years) or the number of months remaining in the Franchise Agreement, whichever is lower. This means Crave aims to recover an amount equivalent to either two years of royalties or the remaining royalties owed under the agreement's original term, depending on which period is shorter.
For a prospective Crave franchisee, this signifies a substantial financial obligation if the agreement is terminated due to your breach. It's crucial to understand what constitutes 'cause' for termination under the Franchise Agreement and to diligently comply with all contractual obligations to avoid such a scenario. This liquidated damages clause is designed to protect Crave's anticipated future royalty income, and it highlights the importance of carefully considering the risks and responsibilities associated with the franchise before signing the agreement.