To whom must a Gokhale Method franchisee promptly pay all sums owing 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.
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, a franchisee who defaults on their agreement, leading to termination, must promptly pay certain sums. Specifically, in addition to other amounts due, the franchisee must pay Gokhale Method Institute, Inc. a lump sum as damages, not as a penalty. This payment is calculated based on the average monthly aggregate of Royalty fees, Brand Fund Contributions (if any), and other fees or product purchases from Gokhale Method over the 12 months preceding termination (or a shorter period if the business operated for less than 12 months). This average is then multiplied by either 18 months or the number of months remaining in the agreement's term, whichever is less.
This lump sum payment serves as a form of liquidated damages to compensate Gokhale Method for losses incurred due to the franchisee's default and the premature termination of the agreement. It is important to note that this payment is in addition to any other outstanding amounts the franchisee owes, including attorney's fees, accountant's fees, and other costs associated with the termination.
It's also important to understand that even after making this payment, Gokhale Method retains the right to pursue injunctive relief and other remedies to enforce the terms of the franchise agreement, particularly concerning non-competition covenants. This means that paying the lump sum does not absolve the franchisee of all obligations or prevent Gokhale Method from taking legal action to protect its interests. Prospective franchisees should carefully consider these financial implications and legal obligations before entering into a franchise agreement with Gokhale Method.