What is the exception to the liquidated damages payment for Gokhale Method franchisees upon termination?
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.
Source: Item 22 — CONTRACTS (FDD page 34)
What This Means (2024 FDD)
According to Gokhale Method's 2024 Franchise Disclosure Document, if the Franchise Agreement is terminated before the end of its term due to the franchisee's default, the franchisee must pay liquidated damages to Gokhale Method. However, there is an exception to this requirement.
The exception to the liquidated damages payment is if the default is due to the death of the franchisee. In this specific case, the franchisee (or their estate) would not be required to pay the liquidated damages that would otherwise be due upon termination for default.
This exception provides a degree of protection to the franchisee's family or estate in the event of their death, as they would not be burdened with the additional financial obligation of liquidated damages on top of any other costs or obligations arising from the franchisee's passing. It is important for prospective franchisees to understand the conditions under which liquidated damages may be assessed and the exceptions that apply, as these can have significant financial implications.