What costs and expenses can Degree Wellness recover in connection with the termination of the franchise agreement?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
15.3 Our Remedies upon Termination. In the event that we terminate this Agreement under Section 15.1 or other applicable provisions of this Agreement, but excluding the circumstances described in Section 15.2, all rights granted to you under this Agreement shall immediately and automatically terminate and revert to us, and we shall be entitled, to recover from you any and all of the foregoing:
a. in those states in which such termination fees are enforceable, to receive from you a termination fee in the amount equal to one-half (1/2) of our then-current initial franchise fee for new Degree Wellness Studio franchises; and
b. an amount equal to your average monthly Continuing Franchise Fee, Fund contribution, and Technology Fee multiplied by the number of months remaining in the Term of this Agreement, discounted by a present value discount factor of five percent (5%) and any additional actual, economic, consequential and indirect damages incurred by us including, without limitation, the loss of future revenues (which we both agree include the expected amount of Continuing Franchise Fees, Fund contributions, and Technology Fees payable by you for the remainder of the Term of this Agreement); and
c. all costs and expenses, including attorneys' fees, incurred in connection with the termination, collection of the termination fee and/or damages, and audit fees and expenses.
Source: Item 23 — Receipts (FDD pages 66–257)
What This Means (2025 FDD)
According to Degree Wellness's 2025 Franchise Disclosure Document, in the event that Degree Wellness terminates the franchise agreement under specific provisions (excluding circumstances described in Section 15.2), Degree Wellness is entitled to recover certain costs and expenses from the franchisee. These recoverable costs include all costs and expenses, including attorneys' fees, incurred in connection with the termination. This also extends to the collection of the termination fee, damages, and audit fees and expenses.
In addition to recovering costs and expenses, Degree Wellness may also be entitled to receive a termination fee from the franchisee. This fee is applicable in states where such termination fees are enforceable and is equivalent to one-half (1/2) of Degree Wellness's then-current initial franchise fee for new Degree Wellness Studio franchises. Degree Wellness can also recover an amount equal to the franchisee's average monthly Continuing Franchise Fee, Fund contribution, and Technology Fee multiplied by the number of months remaining in the Term of this Agreement, discounted by a present value discount factor of five percent (5%) and any additional actual, economic, consequential and indirect damages incurred by Degree Wellness including, without limitation, the loss of future revenues (which both parties agree include the expected amount of Continuing Franchise Fees, Fund contributions, and Technology Fees payable by the franchisee for the remainder of the Term of this Agreement).
This means that if Degree Wellness terminates the agreement due to the franchisee's default or other applicable reasons, the franchisee may be responsible for covering not only the immediate costs associated with the termination process, such as legal and audit fees, but also a termination fee and potential damages for lost future revenue. Prospective franchisees should be aware of these potential financial implications in the event of termination and carefully consider the conditions under which Degree Wellness can terminate the agreement.