Can Fitstop claim expectation or consequential damages from a Fitstop franchisee?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
You hereby waives to the fullest extent permitted by law, any right to or claim for any punitive, exemplary, incidental, indirect, special or consequential damages (including, without limitation, lost profits) against us arising out of any cause whatsoever (whether such cause be based in contract, negligence, strict liability, other tort or otherwise) and agrees that in the event of a dispute, that your recovery is limited to actual damages.
If any other term of this Agreement is found or determined to be unconscionable or unenforceable for any reason, the foregoing provisions shall continue in full force and effect, including, without limitation, the waiver of any right to claim any consequential damages.
Nothing in this Section or any other provision of this Agreement shall be construed to prevent us from claiming and obtaining expectation or consequential damages, including lost future royalties for the balance of the term of this Agreement if it is terminated due to your default, which the parties agree and acknowledge we may claim under this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, Fitstop retains the right to claim expectation or consequential damages, including lost future royalties, from a franchisee if the Franchise Agreement is terminated due to the franchisee's default. This is explicitly stated in Section 19.9 of the agreement, which outlines the waiver of punitive damages by the franchisee but clarifies that this waiver does not prevent Fitstop from claiming such damages.
This provision means that if a Fitstop franchisee breaches the agreement and Fitstop terminates the agreement as a result, Fitstop can seek compensation for not only the immediate losses but also for the anticipated future income (royalties) they would have received had the agreement remained in effect for its full term. This is a significant point for potential franchisees to consider, as the financial implications of defaulting on the agreement could extend far beyond immediate penalties.
It is fairly common in franchise agreements for franchisors to reserve the right to claim consequential damages in the event of a franchisee's default. This clause aims to protect the franchisor's long-term financial interests and ensure they are compensated for the full extent of the losses incurred due to the franchisee's breach. Prospective Fitstop franchisees should carefully evaluate this section and understand the potential financial exposure they face if they fail to meet their obligations under the Franchise Agreement.