When is the Liquidated Damages fee due for an Ella Cafe franchise?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
| Type of Fee1 | Amount | Due Date | Remarks |
|---|---|---|---|
| Liquidated Damages4 | An amount equal to average royalty fees plus brand marketing fees owed by you for a period of 52 weeks multiplied by the lesser of (i) twenty- four months or (ii) the remaining weeks of the franchise term. | On demand | Payable if we terminate your franchise agreement because of your default, or if you terminate the franchise agreement without the right to do so. |
Source: Item 6 — OTHER FEES (FDD pages 10–15)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, the liquidated damages fee is due 'on demand.' This means that Ella Cafe can require immediate payment of the fee.
The liquidated damages fee is imposed if Ella Cafe terminates the franchise agreement due to the franchisee's default, or if the franchisee terminates the agreement without the right to do so. The amount of the liquidated damages is calculated based on the average royalty fees plus brand marketing fees owed by the franchisee for the 52-week period preceding the termination, multiplied by the lesser of 24 months or the number of weeks remaining in the franchise term.
For a prospective Ella Cafe franchisee, this means that terminating the franchise agreement early or being in default leading to termination can result in a significant financial penalty. The franchisee will be responsible for not only outstanding fees but also a liquidated damages fee that could cover up to two years' worth of royalty and brand marketing fees. This is a common practice in franchising to compensate the franchisor for lost future revenue and the costs of finding a replacement franchisee.