Is the non-compliance fee charged by Crown Gold Exchange considered a penalty?
Crown_Gold_Exchange Franchise · 2024 FDDAnswer from 2024 FDD Document
ay charge its then-current training fee. As of the date of this Agreement, the training fee is $250 per day.
- 4.4 Non-Compliance Fee. Crown Gold Franchising may charge Franchisee $500 for any instance of non-compliance with the System Standards or this Agreement (other than Franchisee's non-payment of a fee owed to Crown Gold Franchising) which Franchisee fails to cure after 30 days' notice. Thereafter, Crown Gold Franchising may charge Franchisee $250 per week until
Franchisee ceases such non-compliance. This fee is a reasonable estimate of Crown Gold Franchising's internal cost of personnel time attributable to addressing the non-compliance, and it is not a penalty or estimate of all damages arising from Franchisee's breach. The non-complianc
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to Crown Gold Exchange's 2024 Franchise Disclosure Document, the non-compliance fee is not considered a penalty. Crown Gold Exchange may charge a franchisee $500 for any instance of non-compliance with the System Standards or the Franchise Agreement, provided the franchisee fails to correct the issue after 30 days' notice. After this initial charge, Crown Gold Exchange may charge $250 per week until the franchisee ceases the non-compliance.
The FDD states explicitly that this fee is a reasonable estimate of Crown Gold Exchange's internal cost of personnel time spent addressing the non-compliance. It is not intended as a penalty or a comprehensive estimate of all damages resulting from the franchisee's breach. This non-compliance fee is in addition to any other rights and remedies that Crown Gold Exchange may pursue, including default and termination of the agreement.
This means that if a Crown Gold Exchange franchisee fails to meet the brand's standards or violates the franchise agreement, they will be given a 30-day period to correct the issue. If the problem persists beyond this period, the franchisee will incur an initial fee of $500, followed by weekly charges of $250 until the non-compliance is resolved. It is important to note that these fees are intended to cover Crown Gold Exchange's costs and are not designed to be punitive, although the franchisee is still responsible for any additional damages or legal repercussions resulting from the breach.