What is the effect of the Fly To Fit Franchisee's payment of liquidated damages?

According to the 2024 Fly To Fit Franchise Disclosure Document, if a franchisee pays liquidated damages, it covers Fly To Fit's loss of future royalty fees and marketing fund contributions. However, this payment does not cover all potential financial obligations. The franchisee is still responsible for damages and other amounts arising from Sections 14.3 and 14.4 of the franchise agreement, Fly To Fit's right to injunctive relief for enforcement of Article 13, and any attorneys' fees and other costs and expenses to which Fly To Fit is entitled under the agreement.

In simpler terms, the liquidated damages primarily address the loss of ongoing revenue that Fly To Fit would have received. It is calculated based on the average Royalty Fees and Marketing Fund Contributions that the franchisee owed to Fly To Fit, multiplied by the remaining months in the franchise term (up to a maximum of 24 months). This calculation is used if Fly To Fit terminates the agreement due to the franchisee's default or if the franchisee attempts to terminate the agreement without proper cause.

However, the franchisee remains liable for other potential costs and legal remedies Fly To Fit may pursue. These include obligations that survive termination, such as non-competition, confidentiality, indemnity, and dispute resolution, as well as the immediate payment of all outstanding amounts owed to Fly To Fit. Fly To Fit also retains the right to seek injunctive relief, which is a court order to enforce certain provisions of the agreement, particularly those related to intellectual property and trade secrets. Additionally, the franchisee is responsible for Fly To Fit's legal fees and expenses incurred in enforcing the agreement.

In addition to liquidated damages, Fly To Fit retains the option to purchase the assets of the business or require the franchisee to assign the lease to Fly To Fit. This option must be exercised within 30 days of the agreement's termination or expiration. Therefore, while the liquidated damages cover the loss of future royalties and marketing contributions, franchisees should be aware that they may face additional financial and legal obligations upon termination.