Under what conditions must I pay liquidated damages to Itan?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
You must pay us liquidated damages if either: (a) we terminate this Agreement due to your default; or (b) you terminate this Agreement in any manner other than as permitted by §20.1 or §20.3.
Liquidated damages are calculated as the product of Average Weekly Fees multiplied by the lesser of (a) 104 or (b) the total number of full weeks remaining under the Term as of the termination effective date. "Average Monthly Fees" means the combined average weekly royalty fee and brand fund fee (without regard to any fee waivers or other reductions, and regardless of collection) imposed by this Agreement during the 52-week period preceding the termination date (or during the period of time you operated the Business if less than 52 weeks).
Liquidated damages are due 30 days after we send you an invoice detailing our calculation of same.
Liquidated damages are in addition to and not in lieu of: (a) any fees or other amounts incurred by you prior to the termination of this Agreement, all of which must be paid by you in accordance with the terms of this Agreement; or (b) any damages we or our affiliate incur as a result of your breach of this Agreement; provided, however, that we may not pursue a Claim against you for recovery of lost future profits if you pay us all liquidated damages owed when due.
The parties agree the amount of liquidated damages set forth in this Section is in proportion to, and is necessary to protect, our legitimate interests, including: (a) encouraging our franchisees to commit to the 10-year franchise relationship in which both parties have already invested time and expense to develop; (b) the time and expense we will incur to ensure your timely and orderly departure from our franchise network and recruit a new franchisee to acquire franchise rights to the Territory; (c) protecting the reputation and goodwill associated with our Marks; and (d) partially compensating us for financial damages we expect to incur as a result of your breach or wrongful termination.
If this liquidated damages clause is unenforceable under applicable Law, then we are only entitled to recover actual damages we incur as a result of your default or improper termination.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, a franchisee must pay liquidated damages to Itan if either Itan terminates the Franchise Agreement due to the franchisee's default, or if the franchisee terminates the agreement in any manner not permitted by sections 20.1 or 20.3 of the agreement. These sections outline the specific conditions under which a franchisee can terminate the agreement without penalty, such as Itan failing to cure a material breach.
Liquidated damages are calculated by multiplying the Average Weekly Fees by the lesser of 104 or the total number of full weeks remaining under the term of the agreement as of the termination date. The 'Average Weekly Fees' include the combined average weekly royalty fee and brand fund fee, without regard to any waivers or reductions, during the 52-week period preceding the termination date, or during the period the franchisee operated the business if less than 52 weeks.
The liquidated damages are due 30 days after Itan sends an invoice detailing the calculation. These damages are in addition to any fees or other amounts the franchisee incurred prior to termination, all of which must be paid according to the agreement's terms. However, if the franchisee pays all liquidated damages owed when due, Itan will not pursue a claim for recovery of lost future profits. The FDD states that the liquidated damages clause is designed to protect Itan's legitimate interests, including encouraging franchisees to commit to the 10-year franchise relationship, covering the expenses of transitioning the franchise to a new operator, protecting the brand's reputation, and compensating Itan for financial damages resulting from the breach or wrongful termination.
The FDD also specifies that if the liquidated damages clause is deemed unenforceable under applicable law, Itan is only entitled to recover the actual damages incurred as a result of the franchisee's default or improper termination. This provision ensures that Itan can seek compensation for losses even if the specific liquidated damages calculation is not upheld.