Under what circumstances would a Cream franchisee be required to pay lost revenue damages?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Fee | Amount | Due Date | 1, 2 Remarks |
|---|---|---|---|
| Lost Revenue Damages | The net present value of the Royalties and Brand Fund Contributions from the termination date to the earlier of (i) the 2nd anniversary of termination; or (ii) the scheduled expiration of the franchise term. | Within 30 days after termination | If we terminate the Franchise Agreement because of your default or you terminate without cause, you must pay us lost revenue damages. For purposes of lost revenue damages, Royalties and Brand Fund Contributions will be calculated based on the average monthly Net Sales of your Shop during the last 12 months of its regular operations; provided, that if your 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 during the fiscal year immediately preceding the termination date. |
Source: Item 6 — OTHER FEES (FDD pages 13–17)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, a franchisee may be required to pay lost revenue damages if the Franchise Agreement is terminated due to the franchisee's default, or if the franchisee terminates the agreement without a valid cause. These damages are calculated as the net present value of the Royalties and Brand Fund Contributions from the termination date until the earlier of either the second anniversary of the termination or the scheduled expiration of the franchise term.
The calculation of Royalties and Brand Fund Contributions for lost revenue damages is based on the average monthly Net Sales of the Cream shop during the last 12 months of its regular operation. However, if the shop has not been operating for at least 12 months, the calculation will instead be based on the average monthly Net Sales of all Cream Scoop Shops during the fiscal year immediately preceding the termination date.
This clause in the franchise agreement means that a Cream franchisee who breaches the agreement and causes its termination, or who terminates the agreement without proper justification, could face significant financial penalties. These penalties are designed to compensate Cream for the anticipated future revenue it would have received from the franchise location. Prospective franchisees should carefully consider this potential liability and ensure they fully understand their obligations under the Franchise Agreement to avoid such a situation.