What is the Deck Medic National Advertising Fund Fee considered in the context of lost revenues?
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 National Advertising Fund Fee is considered a component of lost revenues in the event of a breach of the franchise agreement. Specifically, if a franchisee breaches the agreement and Deck Medic terminates it, the franchisee may be liable for lost revenues, profits, and fees that Deck Medic would have received had the breach not occurred and the agreement remained in effect for its full term. These lost revenues include, but are not limited to, Royalty Fees, the National Advertising Fund Fee, Advertising Contributions, and all other fees, revenues, and/or expenses.
To calculate these lost revenues, Deck Medic may use the franchisee's most recent calendar year Gross Sales as a basis. If the business has been open for less than a year, Deck Medic may use the average Gross Sales of Deck Medic businesses across the system during the year of termination. This calculation assumes that the franchisee would have continued to generate the same level of Gross Sales each year for the remainder of the franchise term.
The franchise agreement states that this method of calculating lost revenues is considered a form of liquidated damages and is deemed fair and reasonable. This means that Deck Medic and the franchisee agree in advance on how damages will be calculated in the event of a breach, providing a degree of certainty for both parties. This clause aims to protect Deck Medic's financial interests by ensuring compensation for the income it would have expected to receive over the life of the franchise agreement.