Is the calculation of lost revenues considered a form of liquidated damages by Deck Medic?
Deck_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
- (3) To hold Franchisee and Franchisee's Owners liable for, and recover from each of them, jointly and severally, lost revenues, profits, and fees including, but not limited to Royalty Fees, National Advertising Fund Fee, Advertising Contributions, and all other fees, revenues and/or expenses that would have been paid to Franchisor, under the terms of this Agreement and throughout the Term of this Agreement, had a breach not occurred and had Franchisor not terminated this Agreement.
In calculating and determining the foregoing, Franchisee agrees that in calculating and in determining such damages that it is fair and reasonable to use Franchisee's most recent calendar year Gross Sales in calculating and determining Franchisor lost revenues and fees and by assuming that such Gross Sales would have been earned in each and every year throughout the remainder of the Term had this Agreement not been terminated.
If, however, the Franchised Business has been open and in operation for less than one calendar year, Franchisee agrees that it is fair and reasonable to use an average of Deck Medic Business Gross Sales across the System during the year in which this Agreement was terminated and to use such average Gross Sales for the purpose of calculating and determining Franchisor lost revenues and fees and, in doing so, by assuming that such Gross Sales would have been earned in each and every year throughout the remainder of the Term had this Agreement not been terminated.
Franchisee agrees that the foregoing is a form of liquidated damages, and that it is fair and reasonable.
Source: Item 23 — RECEIPTS (FDD pages 43–228)
What This Means (2024 FDD)
According to Deck Medic's 2024 Franchise Disclosure Document, the calculation of lost revenues, profits, and fees resulting from a breach of the franchise agreement is considered a form of liquidated damages. Deck Medic outlines that franchisees are liable for lost revenues, including Royalty Fees, National Advertising Fund Fees, Advertising Contributions, and other fees that would have been paid had the breach not occurred and the agreement not been terminated.
To calculate these damages, Deck Medic uses the franchisee's most recent calendar year Gross Sales, assuming that this level of sales would have continued throughout the remainder of the franchise term. If the business has been open for less than a year, Deck Medic uses the average Gross Sales across the entire Deck Medic system during the year of termination to project lost revenues.
The franchise agreement explicitly states that the franchisee agrees that this method of calculating lost revenues is a form of liquidated damages and is considered fair and reasonable. This means that by signing the franchise agreement, a franchisee acknowledges and accepts this method of calculating damages in the event of a breach leading to termination.