What is the franchisee's obligation if the Itan franchisee terminates the Franchise Agreement prior to its expiration date?

According to Itan's 2025 Franchise Disclosure Document, if a franchisee terminates the Franchise Agreement before it expires, they must pay liquidated damages to Itan. These damages are calculated by totaling the average weekly royalty and brand fund fees from the 52 weeks leading up to the termination. If the franchise operated for less than 52 weeks, the calculation uses the entire period of operation. This sum is then multiplied by the lesser of 104 (representing two years of fees) or the total number of weeks remaining in the franchise term.

If the franchisee pays these liquidated damages promptly, Itan agrees not to pursue further claims for lost profits. However, paying liquidated damages does not protect the franchisee from other damages Itan might incur due to the franchisee's breach of contract. This means that while Itan waives its right to claim lost profits, it can still seek compensation for other financial harm caused by the franchisee's actions.

This provision is fairly standard in franchising, as it aims to compensate the franchisor for the franchisee's early exit from the agreement. Prospective Itan franchisees should understand that terminating the agreement early can result in significant financial penalties. It is important to carefully consider the implications of this clause before signing the Franchise Agreement and to seek legal counsel to fully understand their rights and obligations.