In the event of a Franchisee's breach of the Exit franchise agreement, how are the liquidated damages calculated that the Subfranchisor is entitled to recover?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
(2) reduce the size of the Protected Territory.
- (D) Nothing in this Section 16 will preclude Subfranchisor from seeking other remedies against Franchisee under state or federal laws or under this Agreement, including, but not limited to, recovery of attorneys' fees, punitive damages and injunctive relief.
16.3. Damages
If this Agreement is terminated by Subfranchisor pursuant to this Section 16, or if Franchisee breaches this Agreement by a wrongful termination of this Agreement, then Subfranchisor will be entitled to seek recovery from Franchisee for all of the damages that Subfranchisor sustained prior to the termination, or will sustain in the future as a result of Franchisee's breach of this Agreement. The actual damages that Subfranchisor would suffer for the loss of prospective fees and other amounts due under this Agreement would be difficult, if not impossible, to ascertain. Therefore, Franchisee agrees, in addition to all damages that Subfranchisor sustained prior to the date of termination, Subfranchisor shall be entitled to recover, for Subfranchisor and for EXIT, as liquidated damages and not as a penalty, an amount equal to the average monthly Continuing Fees paid to Subfranchisor and EXIT in accordance with the EXIT Formula for the twelve (12) month period immediately preceding the termination multiplied by the number of months remaining until the Expiration Date.
**17.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, if the Subfranchisor terminates the agreement due to the Franchisee's breach, or if the Franchisee wrongfully terminates the agreement, the Subfranchisor can seek damages. Because the actual damages from the loss of prospective fees are difficult to determine, the Franchisee agrees to pay liquidated damages.
The liquidated damages will include all damages the Subfranchisor sustained prior to the termination date. In addition to those damages, the Subfranchisor is entitled to recover an amount equal to the average monthly Continuing Fees paid to the Subfranchisor and EXIT according to the EXIT Formula for the 12 months before termination. This average monthly fee is then multiplied by the number of months remaining until the original Expiration Date of the franchise agreement.
In addition to the liquidated damages, the document specifies that the Subfranchisor's ability to pursue other remedies, such as attorney's fees, punitive damages, and injunctive relief, are not limited. This means that Exit franchisees could potentially face significant financial repercussions for breaching their franchise agreement, extending beyond the calculated liquidated damages.