How is the amount of liquidated damages determined for a Desi District franchise?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Liquidated damages | An amount equal to royalty fees for the lesser of (i) 2 years or (ii) the remaining weeks of the franchise term. | On demand | Payable if we terminate your franchise agreement because of your default, or if you terminate the franchise agreement without the right to do so. |
| Royalty | 4% of your gross | Weekly, on | See Note 1 |
| sales | Tuesday | and Note 2. |
Source: Item 6 — OTHER FEES (FDD pages 16–20)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, liquidated damages are determined by the royalty fees. If Desi District terminates the franchise agreement due to the franchisee's default, or if the franchisee terminates the agreement without proper cause, the franchisee must pay liquidated damages.
The amount of these damages will be equal to the royalty fees for either two years or the remaining weeks of the franchise term, whichever is less. Given that the royalty fee is 4% of gross sales, this could be a substantial amount depending on the sales volume of the Desi District location.
This provision is designed to compensate Desi District for the anticipated future royalty payments they would have received had the franchise agreement not been terminated early. It is important for prospective franchisees to understand the circumstances under which liquidated damages may be assessed and to carefully consider the potential financial implications before signing the franchise agreement.