What is the maximum number of months used in the liquidated damages calculation for Gokhale Method?
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 due to the franchisee's default, Gokhale Method will calculate liquidated damages based on a specific formula. This calculation involves multiplying the average monthly fees (Royalty fee, Brand Fund Contribution, and other Fees or product purchases) by a certain number of months.
The maximum number of months used in this calculation is eighteen (18). However, the agreement specifies that if the remaining term of the franchise agreement is less than 18 months, then the calculation will use the number of months remaining in the term. This ensures that Gokhale Method does not collect damages beyond the original term of the agreement.
This liquidated damages clause is designed to compensate Gokhale Method for losses incurred due to the franchisee's early termination of the agreement. It is not a penalty, but rather a reasonable estimate of the damages Gokhale Method will suffer. The franchisee will also be responsible for any outstanding amounts owed to Gokhale Method, as well as attorney and accountant fees associated with the termination.