Under what conditions is a Fly To Fit franchisee required to pay liquidated damages?
Fly_To_Fit Franchise · 2024 FDDAnswer from 2024 FDD Document
| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Liquidated damages | An amount equal to royalty fees and marketing fund contributions for the lesser of (i) 2 years or (ii) the remaining weeks of the franchise term. | On demand | Payable if we terminate your franchise agreement because of your default, or if you terminate the franchise agreement without the right to do so. |
Source: Item 6 — OTHER FEES (FDD pages 12–16)
What This Means (2024 FDD)
According to Fly To Fit's 2024 Franchise Disclosure Document, a franchisee may be required to pay liquidated damages under specific circumstances related to the termination of the franchise agreement. These damages are imposed if Fly To Fit terminates the franchise agreement due to the franchisee's default or if the franchisee terminates the agreement without having the proper legal right to do so.
The amount of liquidated damages is calculated based on the royalty fees and marketing fund contributions that would have been paid. The calculation period is the lesser of two years or the remaining weeks left in the franchise term. This means Fly To Fit aims to recoup the income it would have received had the franchisee continued operating for the agreed-upon duration.
This provision is important for prospective franchisees to understand, as terminating the agreement early or being in default can result in significant financial penalties. Franchisees should carefully consider their ability to meet the obligations of the franchise agreement and the potential costs of early termination. It is advisable to seek legal counsel to fully understand the implications of this clause before signing the franchise agreement.