What financial condition must the Learningrx business have to be eligible for the early termination option?
Learningrx Franchise · 2025 FDDAnswer from 2025 FDD Document
Beginning three (3) years after the date of this Agreement, Franchisee may, at its option, upon sixty (60) days prior written notice ("Notice Period") to franchisor, terminate this Agreement prior to its expiration date ("Early Termination Option") if, at the time of exercising its option, the Business has a negative Net Operating Income on a cash basis (as recorded in the Franchisee's accounting software), and verified by Certified Professional Accountant approved by Franchisor (at Franchisee's sole cost and expense) over any aggregated twelve (12) consecutive month period during the Term of this Agreement.
If Franchisee exercises the Early Termination Option in strict compliance with the terms of this Section 13.06, Franchisor agrees to waive Franchisor's right to seek from Franchisee, and Franchisee shall not be liable in any way for, Franchisor's lost future profits, lost future royalty fees, and/or lost future marketing/advertising fees and Franchisee shall not be subject to any liquidated damages identified in the Franchise Agreement (collectively the "Lost Profits Damages").
Franchisee acknowledges and agrees that Franchisor retains the right to pursue Franchisee for any and all damages (including, by way of example, any and all monies owed to Franchisor prior to the termination of the Franchise Agreement, damages incurred by Franchisor as the result of Franchisee's conversion of existing or prospective customers, trademark damages, reputational damages, damages incurred by Franchisor as the result of Franchisee's failure to provide all paid for services to customers or refunds to customers), other than the Lost Profits Damages, incurred by Franchisor as the result of Franchisee's exercise of the Early Termination Option.
Source: Item 23 — RECEIPT (FDD pages 54–209)
What This Means (2025 FDD)
According to Learningrx's 2025 Franchise Disclosure Document, a franchisee has the option to terminate the agreement early if the business demonstrates a specific financial condition. Beginning three years after the franchise agreement date, a Learningrx franchisee can terminate the agreement prior to its expiration with a 60-day written notice if the business has a negative Net Operating Income on a cash basis. This negative income must be recorded in the franchisee's accounting software and verified by a Certified Professional Accountant approved by Learningrx, with the franchisee bearing the cost of this verification. The negative Net Operating Income must occur over any aggregated 12 consecutive month period during the term of the agreement.
If a Learningrx franchisee exercises this early termination option in strict compliance with the terms outlined in the FDD, Learningrx agrees to waive its right to seek lost future profits, lost future royalty fees, and lost future marketing/advertising fees from the franchisee. Additionally, the franchisee will not be subject to any liquidated damages identified in the Franchise Agreement. This waiver of damages is a significant benefit for franchisees struggling to maintain profitability, as it limits their financial exposure upon exiting the franchise system.
However, it is important to note that Learningrx retains the right to pursue the franchisee for any and all other damages, including monies owed to Learningrx prior to termination, damages resulting from the franchisee's conversion of existing or prospective customers, trademark damages, reputational damages, and damages incurred due to the franchisee's failure to provide paid services or refunds to customers. Therefore, while the waiver of lost profits is a substantial concession, franchisees must still ensure they fulfill all other financial and contractual obligations to avoid further liabilities.
This early termination option provides a safety net for Learningrx franchisees whose businesses are not performing well, but it also underscores the importance of careful financial management and adherence to the franchise agreement. Prospective franchisees should carefully consider the conditions for early termination and the potential liabilities that remain even if the option is exercised.