In the event of termination for cause by Hyper Kidz, what is the deadline for paying the liquidated damages?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
19.7 Liquidated Damages
Upon termination of this Agreement by us for cause as described in Article 18, you agree to pay to us within fifteen (15) days after the effective date of this Agreement's termination, in addition to the amounts owed hereunder, liquidated damages equal to the average monthly Royalty Fees you paid during the twelve (12) months of operation preceding the effective date of termination multiplied by (a) thirty-six (36), or (b) the number of months remaining in the Agreement had it not been terminated, whichever is lower.
The parties hereto acknowledge and agree that it would be impracticable to determine precisely the damages we would incur from this Agreement's termination and the loss of cash flow from Royalty Fees due to, among other things, the complications of determining what costs, if any, we might have saved and how much the Royalty Fees would have grown over what would have been this Agreement's remaining term. The parties hereto consider this liquidated damages provision to be a reasonable, good faith preestimate of those damages.
The liquidated damages provision only covers our damages from the loss of cash flow from the Royalty Fees. It does not cover any other damages, including damages to our reputation with the public and landlords and damages arising from a violation of any provision of this Agreement other than the Royalty Fee section. You and each of your Principals agree that the liquidated damages provision does not give us an adequate remedy at law for any default under, or for the enforcement of, any provision of this Agreement other than the Royalty Fee section.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, if Hyper Kidz terminates the franchise agreement for cause, the franchisee must pay liquidated damages within fifteen days of the termination date. These liquidated damages are in addition to any other amounts the franchisee owes Hyper Kidz.
The liquidated damages are calculated based on the average monthly royalty fees paid by the franchisee during the twelve months before termination. This average is then multiplied by either 36 or the number of months remaining in the franchise agreement, whichever is lower. This calculation aims to compensate Hyper Kidz for the anticipated loss of royalty fees due to the early termination of the agreement.
The FDD specifies that this liquidated damages provision is specifically designed to address the loss of cash flow from royalty fees. It does not cover other potential damages Hyper Kidz might incur, such as harm to its reputation or losses resulting from violations of the franchise agreement beyond the royalty fee section. Hyper Kidz retains the right to pursue additional legal remedies for defaults or enforcement of provisions beyond the royalty fee section, indicating that the liquidated damages are not considered a fully adequate remedy for all possible breaches.