According to Itan's 2025 Franchise Disclosure Document, a franchisee must pay liquidated damages to Itan under specific circumstances related to the termination of the Franchise Agreement. These circumstances include situations where Itan terminates the Franchise Agreement due to the franchisee's default, or if the franchisee terminates the agreement before its expiration date, unless such termination is a result of Itan's uncured breach of the agreement.

The liquidated damages are calculated based on the average weekly royalty fees and brand fund fees. This average is taken from the 52-week period preceding the termination. If the franchise has been operating for less than 52 weeks, the average is calculated over the entire period of operation. This weekly average is then multiplied by a factor, which is the lesser of either 104 (representing two years of fees) or the total number of weeks remaining under the franchise term. The franchisee has 30 days after the invoice to pay the liquidated damages.

The payment of liquidated damages may prevent Itan from pursuing a claim against the franchisee for lost profits. However, it's important to note that paying liquidated damages does not protect the franchisee from other claims or damages that Itan might incur due to the franchisee's breach of the Franchise Agreement. This means that while Itan might waive its right to claim lost profits if liquidated damages are paid, it can still pursue other legal remedies for any additional damages it experiences as a result of the franchisee's actions.

This clause is fairly standard in franchising, as it aims to compensate the franchisor for the early termination of the agreement and the associated losses. However, prospective Itan franchisees should carefully consider the implications of this clause, particularly the calculation method for liquidated damages and the fact that paying these damages does not necessarily shield them from all potential claims by Itan.