Under what conditions is a Crown Gold Exchange franchisee required to pay liquidated damages?
Crown_Gold_Exchange Franchise · 2024 FDDAnswer from 2024 FDD Document
If Crown Gold Franchising terminates this Agreement based upon Franchisee's default (or if Franchisee purports to terminate this Agreement except as permitted under Section 14.1), then within 10 days thereafter Franchisee shall pay to Crown Gold
Franchising a lump sum (as liquidated damages and not as a penalty) calculated as follows: (x) the average Royalty Fees that Franchisee owed to Crown Gold Franchising under this Agreement for the 52-week period preceding the date on which Franchisee ceased operating the Business; multiplied by (y) the lesser of (1) 104 or (2) the number of weeks remaining in the then-current term of this Agreement. If Franchisee had not operated the Business for at least 52 weeks, then (x) will equal the average Royalty Fees and Marketing Fund Contributions that Franchisee owed to Crown Gold Franchising during the period that Franchisee operated the Business. The "average Royalty Fees that Franchisee owed to Crown Gold Franchising" shall not be discounted or adjusted due to any deferred or reduced Royalty Fees and Marketing Fund Contributions set forth in an addendum to this Agreement, unless this Section 14.5 is specifically amended in such addendum. Franchisee acknowledges that a precise calculation of the full extent of Crown Gold Franchising's damages under these circumstances is difficult to determine and the method of calculation of such damages as set forth in this Section is reasonable. Franchisee's payment to Crown Gold Franchising under this Section will be in lieu of any direct monetary damages that Crown Gold Franchising may incur as a result of Crown Gold Franchising's loss of Royalty Fees and Marketing Fund Contributions that would have been owed to Crown Gold Franchising after the date of termination; however, such payment shall be in addition to all damages and other amounts arising under Section 14.3 and Section 14.4, Crown Gold Franchising's right to injunctive relief for enforcement of Article 13, and any attorneys' fees and other costs and expenses to which Crown Gold Franchising is entitled under this Agreement. Except as provided in this Section, Franchisee's payment of this lump sum shall be in addition to any other right or remedy that Crown Gold Franchising may have under this Agreement or otherwise.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to Crown Gold Exchange's 2024 Franchise Disclosure Document, a franchisee may be required to pay liquidated damages under specific circumstances related to the termination of the franchise agreement. If Crown Gold Exchange terminates the agreement due to the franchisee's default, or if the franchisee attempts to terminate the agreement without proper authorization as defined in section 14.1, the franchisee is obligated to pay a lump sum as liquidated damages within 10 days of termination.
The liquidated damages are calculated based on a formula that considers the average royalty fees owed by the franchisee to Crown Gold Exchange. This average is determined over a 52-week period preceding the date the franchisee ceased operating the business. This average is then multiplied by either 104 or the number of weeks remaining in the franchise term, whichever is less. If the franchisee operated for less than 52 weeks, the calculation uses the average royalty fees and marketing fund contributions owed during the actual period of operation.
It's important to note that these liquidated damages are in place of direct monetary damages resulting from the loss of royalty fees and marketing fund contributions after termination. However, the franchisee may still be responsible for other damages and amounts under Sections 14.3 and 14.4, injunctive relief for enforcement of Article 13, and any attorney's fees and expenses. This payment is in addition to any other rights or remedies Crown Gold Exchange may have under the agreement or otherwise.