How are liquidated damages for loss of future royalties calculated for a Goldfish Swim School franchise?

According to Goldfish Swim School's 2025 Franchise Disclosure Document, liquidated damages for loss of future royalties are calculated based on a formula related to past royalty and brand fund contributions. Specifically, if a franchisee defaults and the Franchise Agreement is terminated, Goldfish Swim School can demand payment for liquidated damages.

The amount will be the lesser of two calculations: either three times the total Royalty and Brand Fund Contributions for the preceding 12 months, or the Royalty and Brand Fund Contributions for the remaining term of the Agreement. This means Goldfish Swim School aims to recover an amount that approximates the royalties and brand fund contributions they would have received had the franchisee continued operating the swim school.

The FDD states that Goldfish Swim School believes this calculation is a reasonable approximation of the damages they will incur due to the termination of the Franchise Agreement resulting from the franchisee's default. Prospective franchisees should understand this calculation and consider it when evaluating the financial risks associated with the franchise. It is important to note that this amount is due upon demand, which means the franchisee must be prepared to pay this sum promptly if the Franchise Agreement is terminated due to default.