Under what conditions are liquidated damages payable by a Desi District franchisee?
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. |
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 may become payable under specific circumstances related to the termination of the franchise agreement. If Desi District terminates the franchise agreement due to the franchisee's default, the franchisee will be liable for liquidated damages. Similarly, if the franchisee terminates the franchise agreement without having the proper legal right to do so, they will also be responsible for paying liquidated damages.
The amount of these liquidated damages is calculated based on the royalty fees. The franchisee will be required to pay an amount equal to the royalty fees for a specific period, which is defined as the lesser of two years or the remaining weeks of the franchise term. This means Desi District aims to recoup the royalty fees they would have collected had the franchisee continued operating for the agreed-upon duration.
This provision serves to protect Desi District from financial losses resulting from early termination of the franchise agreement, whether due to the franchisee's failure to meet obligations or the franchisee's decision to prematurely end the agreement without justification. Prospective franchisees should carefully consider these conditions and understand the potential financial implications of terminating the agreement early or failing to comply with its terms.