How are Royalties and Brand Fund Contributions calculated for determining Lost Revenue Damages for a Cream franchise?
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 the 2025 FDD, Cream outlines how lost revenue damages are calculated if the franchise agreement is terminated due to a breach by the franchisee or if the franchisee terminates the agreement without cause. In such cases, determining the exact amount of damages Cream would suffer from the loss of royalty and brand fund contributions is difficult. Therefore, Cream and the franchisee agree on a reasonable estimate called "Lost Revenue Damages."
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 either the second anniversary of the termination date or the scheduled expiration of the franchise term. The calculation is based on the average monthly net sales of the Cream 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 uses the average monthly net sales of all Jeni's Ice Creams Scoop Shops operating under the Cream brand during the last fiscal year.
The franchisee is required to pay these lost revenue damages within 30 days after the termination of the agreement. However, the FDD specifies that this calculation is solely for lost revenue damages and does not prevent Cream from pursuing and recovering any other damages caused by the franchisee's breach of the agreement. This means that in addition to the lost revenue damages, Cream could potentially seek additional compensation for other losses incurred as a result of the franchisee's actions.