How is the Liquidated Damages Fee calculated by Gold Star upon discontinuation or abandonment of the franchise?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
n-refundable |
| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Insufficient Funds Fee | $50 for each unsatisfied attempt to draw Continuing Franchise Fee or Brand Building Fees from your account by direct deposit. | As incurred | Payable to Gold Star Non-refundable |
| POS System and Technology Maintenance Fee17 | $981-$1,853 | Monthly | Payable to Gold Star Non-refundable |
| Liquidated Damages Upon Discontinuation or Abandonment | Average monthly continuing franchise fees during the 12 months preceding an abandonment or discontinuance of the Franchise, multiplied by the lesser of 24 or the number of months remaining in the term of the Franchise | Upon Abandonment or Discontinuance of the Franc |
Source: Item 6 — OTHER FEES (FDD pages 12–18)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the liquidated damages fee upon discontinuation or abandonment of the franchise is calculated based on the average monthly continuing franchise fees during the 12 months preceding the abandonment or discontinuance. This average is then multiplied by the lesser of 24 or the number of months remaining in the franchise term. This fee is payable to Gold Star and is non-refundable.
For a prospective Gold Star franchisee, this means that if they discontinue or abandon their franchise, they will be required to pay a liquidated damages fee. The amount of this fee will depend on their past revenue and the remaining term of the franchise agreement. For example, if a franchisee's average monthly continuing franchise fees were $2,000 and they had 30 months remaining on their franchise agreement, the calculation would use 24 months (since it's the lesser of 24 and 30), resulting in a liquidated damages fee of $48,000 (2,000 x 24).
This liquidated damages provision is fairly standard in franchising. It is designed to compensate the franchisor, Gold Star, for the anticipated future royalty payments they would have received had the franchisee continued to operate the business for the full term of the agreement. Franchisees should carefully consider this potential cost when evaluating the franchise opportunity and ensure they have a solid plan for operating the business successfully to avoid potential abandonment or discontinuation.
It is important to note that the liquidated damages fee is separate from other fees that a franchisee may be required to pay, such as the initial franchise fee, continuing franchise fees, and other fees outlined in the Franchise Disclosure Document. Franchisees should carefully review the entire FDD and franchise agreement to understand all of their financial obligations.