How soon after termination must an Endless Summer Sweets franchisee pay liquidated damages?
Endless_Summer_Sweets Franchise · 2024 FDDAnswer from 2024 FDD Document
- 14.5 Liquidated Damages. If Franchisor terminates this Agreement based upon Franchisee's default (or if Franchisee purports to terminate this Agreement except as permitted under Section 14.1 of this Agreement), then within ten (10) days thereafter Franchisee shall pay to Franchisor a lump sum (as liquidated damages and not as a penalty) calculated as follows: (x) the average Royalty Fees and Marketing Fund Contributions that Franchisee owed to Franchisor under this Agreement for the 52-week period preceding the date on which Franchisee ceased operating the Business; multiplied by (y) the lesser of (i) 104 or (ii) the number of weeks remaining in the thencurrent term of this Agreement.
If Franchisee had not operated the Business for at least 52 weeks,
Source: Item 23 — RECEIPTS (FDD pages 39–125)
What This Means (2024 FDD)
According to Endless Summer Sweets's 2024 Franchise Disclosure Document, if the franchisor terminates the Franchise Agreement due to the franchisee's default, or if the franchisee attempts to terminate the agreement without proper cause, the franchisee is required to pay liquidated damages to Endless Summer Sweets within ten days of the termination.
The liquidated damages are calculated as a lump sum, not a penalty. The amount is determined by multiplying two factors: (x) the average Royalty Fees and Marketing Fund Contributions owed by the franchisee to Endless Summer Sweets for the 52-week period preceding the date the franchisee ceased operating the business, and (y) the lesser of (i) 104 or (ii) the number of weeks remaining in the current term of the Franchise Agreement.
If the franchisee has not operated the business for at least 52 weeks, a different calculation method may apply, though the specifics of this alternate calculation are not detailed in the provided FDD excerpt. This liquidated damages clause is a significant financial consideration for prospective franchisees, as it could require a substantial payment to Endless Summer Sweets upon early termination of the agreement under certain circumstances.