What happens to all references to liquidated damages and termination penalties in the Itan Disclosure Document, Franchise Agreement, and Supplemental Agreements for Indiana franchises?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
Liquidated damages and termination penalties are prohibited by law in the State of Indiana and, therefore, the Disclosure Document, the Franchise Agreement and Supplemental Agreements are amended by the deletion of all references to liquidated damages and termination penalties and the addition of the following language to the original language that appears therein:
Notwithstanding any such termination, and in addition to the obligations of the franchisee as otherwise provided, or in the event of termination or cancellation of the Franchise Agreement under any of the other provisions therein, the franchisee nevertheless shall be, continue and remain liable to franchisor for any and all damages which franchisor has sustained or may sustain by reason of such default or defaults and the breach of the Franchise Agreement on the part of the franchisee for the unexpired Term of the Franchise Agreement.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, for franchises in Indiana, all references to liquidated damages and termination penalties are removed from the Disclosure Document, the Franchise Agreement, and any Supplemental Agreements. However, even with the removal of these references, the franchisee remains liable to Itan for any damages Itan sustains due to the franchisee's default or breach of the Franchise Agreement for the unexpired term of the agreement. This means that while Itan cannot impose pre-determined or 'liquidated' damages, they can still pursue actual damages incurred as a result of the franchisee's actions.
This modification is due to Indiana state law, which prohibits liquidated damages and termination penalties in franchise agreements. The addendum ensures compliance with Indiana Code. Despite the prohibition, Itan retains the right to seek compensation for losses resulting from a franchisee's breach.
For a prospective Itan franchisee in Indiana, this means that you will not be subject to pre-set penalties if you terminate the agreement early or if Itan terminates it due to your default. However, you are still responsible for any actual financial harm that Itan can prove it suffered as a result of your breach of contract. This could include lost profits, costs associated with finding a new franchisee, and damage to Itan's brand reputation. It is important to understand the types of actions that could lead to a breach of contract and the potential financial consequences.