How is the lump sum payment calculated for a Devon Creek franchisee who defaults?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
- 18.1.7. in the event this Agreement is terminated due to Franchisee's default, pay Franchisor a lump sum payment (as liquidated damages and not as a penalty) in an amount equal to: (a) the average weekly Royalty Fee and Brand Fund contribution payable by Franchisee over the twelve (12) month period immediately prior to the date of termination (or such shorter time period if the Franchised Business has been open less than twelve (12) months); (b) multiplied by the lesser of (i) thirty-six (36) months or (ii) the number of months then remaining in the then-current term of this Agreement.
Franchisee acknowledges that a precise calculation of the full extent of the damages Franchisor will incur in the event of termination of this Agreement as a result of Franchisee's default is difficult to determine and that this lump sum payment is reasonable in light thereof.
The liquidated damages payable by Franchisee pursuant to this Section 18.1.7 shall be in addition to all other amounts payable under this Agreement and shall not affect Franchisor's right to obtain appropriate injunctive relief and remedies pursuant to any other provision of this Agreement; and
Source: Item 22 — CONTRACTS (FDD page 45)
What This Means (2024 FDD)
According to the 2024 Devon Creek Franchise Disclosure Document, if the Franchise Agreement is terminated due to the franchisee's default, the franchisee must pay Devon Creek a lump sum as liquidated damages, not as a penalty. This payment is calculated based on a formula that considers the average weekly Royalty Fee and Brand Fund contribution.
The calculation involves determining the average weekly Royalty Fee and Brand Fund contribution payable by the franchisee over the 12-month period immediately before the termination date. If the franchise has been open for less than 12 months, the average is calculated over the shorter period of operation. This average weekly amount is then multiplied by the lesser of two figures: either 36 months or the number of months remaining in the current term of the Franchise Agreement.
This lump sum payment is in addition to any other amounts owed under the Franchise Agreement and does not affect Devon Creek's right to seek injunctive relief or other remedies. The FDD acknowledges that precisely calculating the full extent of damages resulting from a franchisee's default is difficult, and the lump sum payment is considered a reasonable estimate of those damages.