In the event of a Gokhale Method franchisee's default, what is the relationship between the lump sum payment and other damages?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
- 16.7. Liquidated Damages Upon Termination Due to Your Default. In the event this Agreement is terminated prior to the end of its Term due to your default hereunder, with the exception of default due to death of the franchisee, in addition to the amounts set forth in Section 16.6, above, you shall promptly pay to us a lump sum payment (as damages and not as a penalty) for breaching this Agreement in an amount equal to: (a) the average monthly aggregate of Royalty fee, Brand Fund Contribution (if any) and other Fees or product purchases from us payable by you over the twelve (12) month period immediately preceding the date of termination (or such shorter time period if the Franchised Business has been open less than twelve (12) months); (b) multiplied by the lesser of (i) eighteen (18) months or (ii) the number of months then remaining in the then-current Term of this Agreement.
You acknowledge that a precise calculation of the full extent of the damages we will incur in the event of termination of this Agreement as a result of your default is difficult to determine and that this lump sum payment is reasonable in light of the damages we will incur for your material default causing the premature termination of this Agreement.
This lump sum payment shall be in lieu of any damages we may incur as a result of your default, but it shall be in addition to all amounts provided above in Section 16.6 and any attorneys' and accountants' fees and other costs and expenses to which we are entitled under the terms of this Agreement.
Your payment of this lump sum shall not affect our right to obtain appropriate injunctive relief and remedies to enforce this Section 16 and the covenants set forth in Section 17.
Source: Item 22 — CONTRACTS (FDD page 34)
What This Means (2024 FDD)
According to the 2024 Gokhale Method Franchise Disclosure Document, if the Franchise Agreement is terminated early due to the franchisee's default (excluding death), the franchisee must pay a lump sum to Gokhale Method Institute, Inc. This lump sum is considered damages for breaching the agreement and is not a penalty.
The lump sum is calculated by averaging the monthly amount of Royalty fees, Brand Fund Contributions (if any), and other fees or product purchases payable by the franchisee over the 12 months before termination. If the business has been open for less than 12 months, the average is calculated over that shorter period. This average monthly amount is then multiplied by either 18 months or the number of months remaining in the current term of the agreement, whichever is less.
This lump sum payment is in place of any other damages Gokhale Method might incur due to the franchisee's default. However, the franchisee will still be responsible for all amounts outlined in Section 16.6 of the agreement, as well as any attorney and accountant fees and other costs. The payment of this lump sum does not prevent Gokhale Method from pursuing injunctive relief or other remedies to enforce Section 16 and the covenants in Section 17 of the agreement.