What is the impact of cost savings experienced by Cream on the calculation of Lost Revenue Damages?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
If we terminate this Agreement because of your breach or if you terminate this Agreement without cause, you and we agree that it would be difficult, if not impossible, to determine the amount of damages that we would suffer due to the loss or interruption of the revenue stream we otherwise would have derived from your continued payment of Royalties, and that the Brand Fund would have otherwise derived from your continued contributions to those funds, through the remainder of the Term. Therefore, you and we agree that a reasonable estimate of such damages, less any cost savings we might have experienced (the "Lost Revenue Damages") is an amount equal to the net present value of the Royalties and Brand Fund Contributions that would have become due had this Agreement not been terminated, from the date of termination, to the earlier of (1) the 2nd anniversary of the termination date; or (2) the scheduled expiration of the Term. For the purposes of this Section, Royalties and Brand Fund Contributions will be calculated based on the average monthly Net Sales of your Shop during the 12 full calendar months immediately preceding the last date of regular operations of your Shop; provided, that if as of such date your Shop has not been operating for at least 12 months, Royalties and Brand Fund Contributions will be calculated based on the average monthly Net Sales of all Jeni's Ice Creams Scoop Shops operating under the Marks during our last fiscal year.
You agree to pay us Lost Revenue Damages within 30 days after this Agreement is terminated. You and we agree that the calculation described in this Section is a calculation only of the Lost Revenue Damages and that nothing herein shall preclude or limit us from proving and recovering any other damages caused by your breach of the Agreement.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, if the franchise agreement is terminated due to the franchisee's breach or if the franchisee terminates the agreement without cause, the franchisee may owe Cream Lost Revenue Damages. These damages are designed to compensate Cream for the lost revenue stream it would have received from royalties and brand fund contributions had the agreement continued.
The calculation of Lost Revenue Damages takes into account any cost savings that Cream might experience as a result of the termination. The Lost Revenue Damages are calculated as the net present value of the royalties and brand fund contributions that would have been due from the termination date until the earlier of the second anniversary of the termination date or the scheduled expiration of the term. This calculation is based on the average monthly Net Sales of the franchisee's shop during the 12 full calendar months immediately preceding the last date of regular operations. If the shop has not been operating for at least 12 months, the calculation will be based on the average monthly Net Sales of all Jeni's Ice Creams Scoop Shops operating under the Marks during Cream's last fiscal year.
In practical terms, this means that if Cream experiences cost savings due to the termination of the franchise agreement, the amount the franchisee owes in Lost Revenue Damages will be reduced. This clause protects the franchisee from paying for revenue that Cream no longer needs to generate due to reduced operating costs. However, the FDD specifies that the calculation only applies to Lost Revenue Damages, and Cream retains the right to pursue additional damages caused by the franchisee's breach of the agreement.