factual

If the Dryject franchise agreement is terminated, what sums are immediately due to the franchisor?

Dryject Franchise · 2025 FDD

Answer from 2025 FDD Document

  • (b) The parties further agree that, in addition to such other damages awarded or any and all other damages We may have in the future for any violations of Your post-termination obligations, if this Agreement is terminated by Us because of Your default or if You terminate without cause, You shall be liable to Us for a lump sum termination fee equal to the net present value of the Royalty Service Fees and Marketing Fund Fees that would have become due following termination of this Agreement, for the period this Agreement would have remained in effect but for Your default. Royalty Service Fees and Marketing Fund Fees for purposes of this Section shall be calculated based on the Franchised Business' average monthly Gross Revenues for the twelve (12) months preceding the termination date; or (ii) a payment amount equal to the Minimum Royalty Service Fees and Marketing Fund Fees that would have become due following termination of this Agreement for the period this Agreement would have remained in effect but for Your default; whichever is greater. The payment amount would be equal to the net present value utilizing the

Prime Rate as published per the Wall Street Journal. This fee is in addition to, and not in lieu of any other damages We sustain as a result of the termination. The parties hereto acknowledge and agree that it would be impracticable to determine precisely the damages We would incur from this Agreement's termination due to Your default, and the loss of cash flow due to, among other things, the complications of determining what costs, if any, We might have saved and how much the fees would have grown over what would have been this Agreement's remaining Term. The parties consider this liquidated damages provision to be a reasonable, good faith and genuine pre-estimate of those damages, and not a penalty.

Source: Item 8 — BUSINESS RELATIONSHIP (FDD pages 68–229)

What This Means (2025 FDD)

According to Dryject's 2025 Franchise Disclosure Document, if the franchise agreement is terminated by Dryject due to the franchisee's default, or if the franchisee terminates the agreement without cause, the franchisee must pay Dryject a termination fee. This fee is a lump sum equal to the net present value of the Royalty Service Fees and Marketing Fund Fees that would have been due for the remainder of the agreement's term.

The calculation of this termination fee is based on either (i) the average monthly Gross Revenues for the twelve months preceding the termination date, or (ii) the Minimum Royalty Service Fees and Marketing Fund Fees that would have become due following termination of this Agreement for the period this Agreement would have remained in effect but for Your default; whichever is greater. The net present value is calculated using the Prime Rate as published in the Wall Street Journal.

This termination fee is in addition to any other damages Dryject might incur as a result of the termination. The FDD states that determining the precise damages from early termination is difficult, considering factors like potential cost savings and fee growth over the remaining term. Therefore, this liquidated damages provision is considered a reasonable pre-estimate of those damages and not a penalty.

Disclaimer: This information is extracted from the 2025 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.