When are Liquidated Damages due to Engel & Volkers?

According to Engel & Volkers's 2025 Franchise Disclosure Document, liquidated damages are due upon demand if the Franchise Agreement is terminated due to the franchisee's breach. This means that if Engel & Volkers terminates the franchise agreement because the franchisee has violated its terms, Engel & Volkers can demand immediate payment of liquidated damages.

The liquidated damages are calculated based on a formula that considers the average monthly Royalty fees, National Marketing and Technology Fund contribution, and any other fees due. This average is then multiplied by either 24 months or the number of full calendar months remaining on the franchise term, whichever is less. If the termination occurs before the franchisee begins operating or before Royalty fees and National Marketing and Technology Fund contributions are due, the liquidated damages will be based on what the combined monthly average of these fees would have been, projected over 24 months. This projection is based on the franchisee's (or their owners') gross revenue from residential real estate brokerage services in the 12 months before the franchise agreement's effective date. If the franchisee did not previously operate a residential real estate brokerage, the liquidated damages will be equal to the minimum annual Royalty for 24 months, plus any other fees due and payable.

This provision is significant for prospective Engel & Volkers franchisees because it outlines the financial consequences of breaching the franchise agreement. Franchisees should be aware that termination due to a breach can result in a substantial payment to Engel & Volkers, potentially covering up to two years' worth of fees. It is important to understand what constitutes a breach of contract and to ensure full compliance with the franchise agreement to avoid such penalties. Franchisees should also carefully document their gross revenues, as this information is used to calculate liquidated damages in certain scenarios.