Under what condition are Dryject Liquidated Damages charged?

According to Dryject's 2025 Franchise Disclosure Document, liquidated damages are charged if the Franchise Agreement is terminated due to the franchisee's default. In such a case, the franchisee must pay Dryject a lump sum. This sum is equivalent to the total Royalty Service Fees and Marketing Fund Fees that the franchisee would have been expected to pay for the remainder of the franchise agreement term. This calculation is based on the franchised business's average monthly Gross Revenues over the 12 months immediately preceding the termination date.

If the Dryject franchisee has not been in operation for at least 12 months before the termination date, the calculation method changes. In this scenario, the Royalty Service Fees and Marketing Fund Fees will be calculated based on the average monthly Gross Sales of all Dryject franchised businesses during the company's last fiscal year. This alternative calculation ensures that Dryject receives compensation even if the franchisee's business is relatively new and lacks a sufficient operating history to determine an appropriate average.

This liquidated damages clause is designed to protect Dryject's anticipated revenue stream in the event of a franchisee's default and subsequent termination. It is a common practice in franchising to include such clauses to compensate the franchisor for the loss of future royalties and marketing contributions. Prospective franchisees should carefully consider this potential financial obligation and ensure they understand the circumstances under which default can occur, as well as the method for calculating the liquidated damages.