In the event of a breach, can Deer Solution recover lost revenues and profits from the franchisee?
Deer_Solution Franchise · 2025 FDDAnswer from 2025 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, Brand Development 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 Deer Solution 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 55–246)
What This Means (2025 FDD)
According to Deer Solution's 2025 Franchise Disclosure Document, in the event of a breach of the franchise agreement, Deer Solution has the right to recover lost revenues and profits from the franchisee. Specifically, Deer Solution can hold the franchisee and their owners liable for lost revenues, profits, and fees that would have been paid to Deer Solution under the terms of the agreement throughout its term, had the breach not occurred and had Deer Solution not terminated the agreement. This includes, but is not limited to, Royalty Fees, Brand Development Fund Fee, Advertising Contributions, and all other fees, revenues, and/or expenses.
The FDD specifies how these lost revenues are calculated. If the franchise has been open for at least one calendar year, Deer Solution can use the franchisee's most recent calendar year gross sales to project lost revenues and fees for each remaining year of the franchise term. If the business has been open for less than a year, Deer Solution can use the average gross sales of all Deer Solution businesses in the system during the year of termination to project these losses. The franchisee agrees that this method of calculation is a fair and reasonable form of liquidated damages.
This clause has significant implications for a prospective Deer Solution franchisee. It means that a breach of contract could result in substantial financial penalties, potentially encompassing all future royalties and fees that Deer Solution expected to receive over the entire term of the agreement. Franchisees should, therefore, carefully consider their ability to comply with all terms of the franchise agreement and understand the potential financial risks associated with a breach.