Does payment of liquidated damages prevent Itan from seeking other damages due to a franchisee's breach?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
You must pay us liquidated damages if: (a) we terminate the Franchise Agreement due to your default; or (b) you terminate the Franchise Agreement prior to its expiration date (except in accordance with the provisions governing your right to terminate following our uncured breach). Liquidated damages are calculated as the sum of average weekly royalty fees and brand fund fees imposed during the 52-week period preceding termination (or your entire period of operation if less than 52-weeks) multiplied by the lesser of: (a) 104 (representing 2 years of fees); or (b) the total number of weeks remaining under the term. If you pay us liquidated damages in a timely manner, we may not pursue a claim against you for lost profits. However, payment of liquidated damages does not prevent us from seeking other damages we incur due to your breach.
Source: Item 6 — OTHER FEES (FDD pages 11–15)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, payment of liquidated damages does not necessarily prevent Itan from seeking additional damages from a franchisee who has breached the Franchise Agreement. The FDD specifies the conditions under which liquidated damages are assessed and clarifies the extent to which Itan can pursue further financial remedies.
Itan assesses liquidated damages if the Franchise Agreement is terminated either due to the franchisee's default or if the franchisee terminates the agreement before its expiration, unless the franchisee is terminating due to Itan's uncured breach. The liquidated damages are calculated based on the average weekly royalty and brand fund fees over the 52 weeks preceding termination (or the entire operating period if less than 52 weeks), multiplied by either 104 (representing two years of fees) or the number of weeks remaining in the term, whichever is less.
While Itan agrees not to pursue a claim for lost profits if the franchisee pays the liquidated damages in a timely manner, the FDD explicitly states that payment of liquidated damages does not prevent Itan from seeking other damages incurred as a result of the franchisee's breach. This means that in addition to liquidated damages, Itan may pursue claims for other financial losses or expenses it incurs due to the franchisee's actions. This could include costs associated with correcting the breach, legal fees, or other consequential damages.
This provision is important for prospective franchisees to understand, as it clarifies that paying liquidated damages may not be the only financial obligation if they breach the Franchise Agreement. Franchisees should be aware of the potential for additional claims beyond the liquidated damages amount and should seek legal counsel to fully understand their obligations and potential liabilities under the Franchise Agreement.