How is the liquidated damages amount calculated for a Crepe De Licious franchise upon termination?
Crepe_De_Licious Franchise · 2025 FDDAnswer from 2025 FDD Document
igations in Sections 8, 11, 12, 14, 17, 18, and 19 survive termination or expiration of this Agreement (regardless of whether termination is wrongful) or a Transfer by you. You will continue to comply with your obligations under these sections following termination or expiration of this Agreement or a Transfer until the obligations, by their nature or by the relevant express provisions, expire.
- 17.13 Liquidated Damages. Upon termination of this Agreement by us for any reason other than the expiration of the contract term, you agree to pay to us within 15 days after the effective date of this Agreement's termination, in addition to the amounts owed hereunder, liquidated damages equal to the combined average monthly Royalty Fees and Advertisement Fund Contributions payable by you (without regard to any fee waivers or other reductions) from the date you open your Restaurant, Kiosk, or Food Truck through the date of early termination multiplied by the lesser of (a) thirty-six (36) or (b) the number
of months remaining in the term of the Agreement had it not been terminated, except that liquidated damages will not under any circumstances be less than $30,000.
Source: Item 22 — CONTRACTS (FDD page 57)
What This Means (2025 FDD)
According to Crepe De Licious's 2025 Franchise Disclosure Document, if the franchise agreement is terminated by the franchisor for reasons other than the expiration of the contract term, the franchisee must pay liquidated damages. These damages are calculated by combining the average monthly Royalty Fees and Advertisement Fund Contributions, without considering any waivers or reductions, from the restaurant's opening date to the termination date. This combined average is then multiplied by the lesser of 36 or the number of months remaining in the agreement's term had it not been terminated. However, the liquidated damages will not be less than $30,000 under any circumstances.
The FDD states that this liquidated damages provision is in place because it would be difficult to precisely determine the damages Crepe De Licious would incur from the agreement's termination. This includes the loss of cash flow from Royalty Fees and Advertisement Fund Contributions, and the complications of determining potential cost savings and the growth of Royalty Fees and Advertisement Fund Contributions over the remaining term of the agreement.
This provision is designed to provide a reasonable pre-estimate of damages, acknowledging the challenges in calculating the exact financial impact of an early termination. For a prospective franchisee, this means that terminating the agreement early could result in a significant financial obligation, potentially reaching a minimum of $30,000, regardless of the specific circumstances leading to the termination. Franchisees should carefully consider this clause and its implications before signing the franchise agreement.