Under what conditions will a Dryject franchisee be liable for a lump sum termination fee?
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 the 2025 Dryject Franchise Disclosure Document, a franchisee may be liable for a lump sum termination fee under specific circumstances related to the termination of the franchise agreement. If Dryject terminates the agreement due to the franchisee's default, or if the franchisee terminates the agreement without a valid cause, the franchisee will be responsible for paying Dryject a termination fee.
The termination fee is calculated as the net present value of the Royalty Service Fees and Marketing Fund Fees that would have been due for the remaining period of the agreement. This calculation is based on either the average monthly Gross Revenues of the franchised business for the 12 months prior to termination, or the Minimum Royalty Service Fees and Marketing Fund Fees that would have become due following termination of the agreement, whichever amount is greater. The net present value is determined using the Prime Rate as published in the Wall Street Journal.
The FDD specifies that this lump sum termination fee is in addition to any other damages Dryject might incur as a result of the termination. Dryject considers this liquidated damages provision a reasonable, good faith pre-estimate of the damages they would incur due to the agreement's termination, and not a penalty. This clause aims to address the difficulty in precisely determining the damages resulting from the termination, including the loss of cash flow and the complications in estimating potential cost savings and fee growth over the remaining term of the agreement.