What is the timeframe considered when calculating liquidated damages if an Itan franchisee operated for less than 52 weeks?
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, the calculation of liquidated damages considers the franchisee's entire period of operation if it was less than 52 weeks. Liquidated damages are imposed if Itan terminates the Franchise Agreement due to the franchisee's default, or if the franchisee terminates the agreement before its expiration date, unless it's due to Itan's uncured breach.
The liquidated damages are calculated by summing the average weekly royalty fees and brand fund fees. This sum is then multiplied by the lesser of 104 (representing two years of fees) or the total number of weeks remaining under the franchise term. However, if the Itan franchisee operated for less than 52 weeks, the calculation uses the average weekly royalty and brand fund fees from the entire period of operation.
This means that new Itan franchisees who fail early in their franchise term could have their liquidated damages calculated based on a shorter, potentially less profitable, operational history. While paying liquidated damages in a timely manner may prevent Itan from pursuing a claim for lost profits, it does not protect the franchisee from other damages Itan incurs due to the franchisee's breach of contract. Franchisees should be aware that this calculation method could still result in a significant financial obligation if the franchise agreement is terminated early.