How is the liquidated damages amount calculated if Dermani Medspa terminates the agreement with cause?
Dermani_Medspa Franchise · 2025 FDDAnswer from 2025 FDD Document
- 15.7.2. The parties hereto acknowledge and agree that it would be impracticable to determine precisely the damages we would incur from this Agreement's termination and the loss of cash flow from Royalty Fees due to, among other things, the complications of determining what costs, if any, we might have saved and how much the Royalty Fees would have grown over what would have been this Agreement's remaining term. The parties hereto consider this liquidated damages provision to be a reasonable, good faith pre-estimate of those damages.
- 15.7.3. The liquidated damages provision only covers our damages from the loss of cash flow from the Royalty Fees. It does not cover any other damages, including damages to our reputation with the public and landlords and damages arising from a violation of any provision of this Agreement other than the Royalty Fee section. You and each of your owners agree that the liquidated damages provision does not give us an adequate remedy at law for any default under, or for the enforcement of, any provision of this Agreement other than the Royalty Fee section.
Source: Item 23 — RECEIPTS (FDD pages 66–311)
What This Means (2025 FDD)
Based on the 2025 Dermani Medspa Franchise Disclosure Document, the liquidated damages calculation focuses specifically on the loss of royalty fees. The FDD states that determining the precise damages from the agreement's termination would be difficult, particularly in estimating potential cost savings and royalty fee growth over the remaining term of the agreement. Therefore, the liquidated damages provision is considered a reasonable, good-faith pre-estimate of these damages related to the loss of royalty fees.
This liquidated damages provision solely addresses the loss of cash flow from royalty fees and does not cover other potential damages. These excluded damages include harm to Dermani Medspa's reputation with the public and landlords, as well as damages resulting from violations of any agreement provision outside of the royalty fee section. Dermani Medspa emphasizes that this liquidated damages provision is not an adequate remedy for defaults or enforcement of provisions beyond the royalty fee section.
For a prospective Dermani Medspa franchisee, this means that if the agreement is terminated, the franchisee could be liable for liquidated damages based on estimated lost royalty fees. However, they might also face additional claims for other types of damages not covered by this provision. It is important for franchisees to understand the scope and limitations of this clause and to seek legal counsel to fully understand their potential liabilities upon termination.