What two payment amounts are compared to determine the Dryject termination fee, and which one is used?
Dryject Franchise · 2025 FDDAnswer 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, the termination fee calculation involves comparing two potential payment amounts. The first is based on the net present value of Royalty Service Fees and Marketing Fund Fees that would have been due for the remainder of the franchise agreement term, calculated using the average monthly Gross Revenues from the 12 months preceding termination. The second is based on the net present value of the Minimum Royalty Service Fees and Marketing Fund Fees that would have been due for the remaining term.
Dryject will then use whichever of these two calculated amounts is greater as the termination fee. This fee is in addition to any other damages Dryject might incur due to the termination. The net present value is calculated using the Prime Rate as published in the Wall Street Journal.
This clause is triggered if Dryject terminates the agreement due to the franchisee's default or if the franchisee terminates the agreement without a valid cause. The FDD states that this liquidated damages provision is considered a reasonable, good faith, and genuine pre-estimate of damages, not a penalty, due to the difficulty of precisely determining the damages resulting from early termination.
For a prospective Dryject franchisee, this means that terminating the agreement early can result in a significant financial obligation. The termination fee is designed to compensate Dryject for the anticipated future royalties and marketing fund contributions they would have received had the agreement remained in effect. Franchisees should carefully consider this potential liability when evaluating the franchise opportunity and ensure they have a clear understanding of the circumstances under which termination fees may apply.