What is multiplied to calculate the liquidated damages for a Fly To Fit franchise?
Fly_To_Fit Franchise · 2024 FDDAnswer from 2024 FDD Document
- 14.5 Liquidated Damages. If Fly To Fit Franchise terminates this Agreement based upon Franchisee's default (or if Franchisee purports to terminate this Agreement except as permitted under Section 14.1), then within 10 days thereafter Franchisee shall pay to Fly To Fit Franchise 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 Fly To Fit Franchise under this Agreement for the 12-month period preceding the date on which Franchisee ceased operating the Business; multiplied by (y) the lesser of (1) 24 or (2) the number of months remaining in the then-current term of this Agreement.
If Franchisee had not operated the Business for at least 12 months, then (x) will equal the average Royalty Fees and Marketing Fund Contributions that Franchisee owed to Fly To Fit Franchise during the period that Franchisee operated the Business.
Source: Item 22 — CONTRACTS (FDD page 44)
What This Means (2024 FDD)
According to Fly To Fit's 2024 Franchise Disclosure Document, the liquidated damages calculation involves multiplying two factors. The first factor is the average Royalty Fees and Marketing Fund Contributions that the franchisee owed to Fly To Fit for the 12-month period preceding the date the franchisee ceased operating the business. If the franchisee operated the business for less than 12 months, the average is calculated based on the period they were in operation.
The second factor is the lesser of 24 or the number of months remaining in the then-current term of the Franchise Agreement. This means that the damages are capped at either two years' worth of fees or the remaining term of the agreement, whichever is shorter.
This liquidated damages clause is triggered 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. The FDD states that this payment is in place of direct monetary damages for the loss of future Royalty Fees and Marketing Fund Contributions but does not cover damages and other amounts arising under Section 14.3 and Section 14.4, 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 this Agreement.