How are liquidated damages calculated if the Gokhale Method franchise agreement is terminated early?

According to Gokhale Method's 2024 Franchise Disclosure Document, if the franchise agreement is terminated early, the franchisee may be liable for liquidated damages. The liquidated damages are calculated using a specific formula. First, the average monthly Royalty fee and Brand Fund Contribution, if any, payable by the franchisee over the twelve (12) month period immediately preceding the date of termination is determined. If the Franchised Business has been open for less than twelve months, the average is calculated over the shorter time period. This average monthly amount is then multiplied by the lesser of either eighteen (18) months or the number of months remaining in the current term of the franchise agreement.

For a prospective Gokhale Method franchisee, this means that early termination of the franchise agreement could result in a significant financial obligation. The amount owed will depend on the royalty fees and brand fund contributions paid, as well as the remaining term of the agreement. It is important to note that the Brand Fund Contribution is included in this calculation, although the evidence does not specify the amount of the Brand Fund Contribution.

This type of liquidated damages clause is relatively common in franchise agreements, as it is designed to compensate the franchisor for the anticipated future royalties and fees they would have received had the agreement not been terminated. Franchisees should carefully consider the implications of this clause before signing the franchise agreement and should be aware of the potential costs associated with early termination. Understanding this calculation can help a franchisee assess the financial risks associated with the Gokhale Method franchise.