When is the liquidated damages fee due 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, the liquidated damages fee is due 'on demand.' This fee is imposed if Desi District terminates the franchise agreement due to the franchisee's default, or if the franchisee terminates the agreement without proper authorization.
The amount of the liquidated damages is equivalent 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 represent a substantial financial obligation, depending on the store's sales volume and the remaining length of the franchise agreement.
Prospective franchisees should carefully consider the circumstances under which this fee could be levied. It is important to understand what constitutes a 'default' under the franchise agreement and to ensure compliance with all terms to avoid potential termination and the associated liquidated damages. Franchisees should also be aware of their rights and obligations regarding termination to avoid terminating the agreement improperly.