What damages are covered by the liquidated damages provision in the Hck Hot Chicken franchise agreement?
Hck_Hot_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
Chicken" as part of Franchisee's assumed, fictitious or corporate name, Franchisee shall promptly amend such registration to delete Franchisor's Marks and any confusingly similar marks or names therefrom.
- 15.5 Liquidated Damages. If following termination of this Agreement, Franchisee and/or any Restricted Person violates any of the terms of the non-competition provisions set forth in Section 12.1 of this Agreement or the non-competition covenants set forth in Section 6 of the Continuing Guaranty set forth in Attachment C, then in addition to any injunctive or other relief or other amounts that may be due under this Agreement, Franchisee agrees to pay to Franchisor liquidated damages equal to the average monthly Continuing Royalties and Brand Fund Contributions that Franchisee was required to pay (without regard to any fee waivers or other reductions) from the date the Franchised Restaurant opened through the date of early termination multiplied by the lesser of: (a) 36; or (b) the number of months remaining in the Agreement had it not been terminated, except that liquidated damages will not under any circumstances be less than $30,000. The parties hereto acknowledge and agree that it would be impracticable to determine precisely the damages Franchisor would incur from this Agreement's termination and the loss of cash flow from Continuing Royalties and Brand Fund Contributions due to, among other things, the complications of determining what costs, if any, Franchisor might have saved and how much the Continuing Royalties would have grown over what would have been this Agreement's remaining term. The parties hereto consider these liquidated damages provision to be a reasonable, good faith pre-estimate of those damages. The liquidated damages provision only covers Franchisor's damages from the loss of cash flow from the Continuing Royalties and Brand Fund Contributions. It does not cover any other damages, including damages to Franchisor's reputation with the public and landlords and damages arising from a violation of any provision of this Agreement other than the Continuing Royalties and Brand Fund Contribution sections. Franchisee and each of its owners agree that the
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 54)
What This Means (2025 FDD)
According to the 2025 Hck Hot Chicken Franchise Disclosure Document, the liquidated damages provision primarily addresses the franchisor's losses related to cash flow from Continuing Royalties and Brand Fund Contributions. This provision is triggered if a franchisee or any Restricted Person violates the non-competition terms outlined in Section 12.1 of the agreement or Section 6 of the Continuing Guaranty.
If such a violation occurs, Hck Hot Chicken is entitled to liquidated damages calculated by multiplying the average monthly Continuing Royalties and Brand Fund Contributions (without considering any waivers or reductions) from the restaurant's opening date to the termination date by a factor. This factor is the lesser of 36 or the number of months remaining in the franchise agreement had it not been terminated early. However, the liquidated damages will not be less than $30,000 under any circumstances.
The FDD specifies that the liquidated damages provision is intended to cover Hck Hot Chicken's damages resulting from the loss of cash flow from Continuing Royalties and Brand Fund Contributions. It explicitly states that it does not cover other types of damages, such as harm to the franchisor's reputation with the public and landlords, or damages arising from violations of other provisions within the agreement. The agreement emphasizes that this liquidated damages provision is not an adequate remedy for any default or enforcement of provisions other than those related to Continuing Royalties and Brand Fund sections.