Is the payment of Competitive Liquidated Damages considered a penalty for a Hydrodog franchisee?
Hydrodog Franchise · 2025 FDDAnswer from 2025 FDD Document
Your payment of the Competitive Liquidated Damages will not be considered a penalty, but instead a reasonable estimate of fair compensation to the Franchisor for some of, but not all of, the damages, costs and expenses it will incur if you violate the Competitive Restriction.
The Franchisor is also be entitled to recover all costs, including attorneys' fees incurred in connection with collection of Liquidated Damages as well as enforcing its rights.
Without limiting the foregoing, the Competitive Liquidated Damages will not be the Franchisor's exclusive remedy, will not prevent us from seeking other actual or consequential damages, injunctive relief enjoining future violations of the Competitive Restriction, nor will it in any way limit the Franchisor' right to assert that we have no adequate remedy at law in the event of breach.
Source: Item 23 — RECEIPTS (FDD pages 43–166)
What This Means (2025 FDD)
According to Hydrodog's 2025 Franchise Disclosure Document, the payment of Competitive Liquidated Damages is not considered a penalty. If a franchisee violates the Competitive Restriction outlined in the Franchise Agreement, they must pay partial liquidated damages equal to Hydrodog's then-current initial franchise fee within 15 calendar days of the violation. Hydrodog considers this payment a reasonable estimate of fair compensation for the costs and expenses it would incur to investigate and enforce its rights.
This payment is intended to cover Hydrodog's costs related to investigating the violation and preparing to enforce its rights, but it does not cover all potential damages. Hydrodog is also entitled to recover all costs, including attorneys' fees, associated with collecting the Liquidated Damages and enforcing its rights. The Competitive Liquidated Damages are not Hydrodog's exclusive remedy, and Hydrodog retains the right to seek other actual or consequential damages, injunctive relief, or assert that it has no adequate remedy at law in the event of a breach.
In practical terms, this means that if a Hydrodog franchisee engages in a competitive business activity that violates the franchise agreement, they will be required to pay a sum equal to the initial franchise fee as a form of liquidated damages. However, this payment does not protect the franchisee from further legal action or claims for additional damages by Hydrodog. Prospective franchisees should understand the scope of the Competitive Restriction and the potential financial consequences of violating it, as the liquidated damages are in addition to other potential legal remedies available to Hydrodog.