In the event of a breach, does Deer Solution have the right to recover advertising contributions from the franchisee?
Deer_Solution Franchise · 2025 FDDAnswer from 2025 FDD Document
(2) To hold Franchisee and Franchisee's Owners liable for, and recover from each of them, jointly and severally, all payments, fees, monetary obligations, financial obligations, interest, and charges due and owing to Franchisor from Franchisee pursuant to this Agreement, the Ancillary Agreements, and/or any other agreements between Franchisee and Franchisor, including, without limitation, Royalty Fees and Advertising Contributions with each and every payment and obligation to be accelerated and due immediately.
(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 advertising contributions from the franchisee. Specifically, Deer Solution can hold the franchisee and their owners liable for all payments and financial obligations, including advertising contributions, that are due to Deer Solution. This means that if a franchisee violates the terms of the agreement, Deer Solution can demand immediate payment of all outstanding advertising fees.
Furthermore, Deer Solution can recover not only the advertising contributions that are currently owed but also lost revenues, profits, and fees, including advertising contributions, that would have been paid to Deer Solution throughout the entire term of the agreement had the breach not occurred and the agreement not been terminated. To calculate these lost revenues and fees, Deer Solution may use the franchisee's most recent calendar year gross sales or, if the business has been open for less than a year, an average of Deer Solution business gross sales across the system during the year of termination.
This provision acts as a form of liquidated damages, meaning that the franchisee agrees that the method of calculating damages is fair and reasonable. This clause highlights the importance of adhering to the franchise agreement, as a breach could result in significant financial liabilities for the franchisee, including the obligation to pay advertising contributions for the remainder of the franchise term, even if the business is no longer operating.