Are the liquidated damages provisions in the Ledgers Franchise Agreement enforceable in Indiana?

According to the 2025 Ledgers Franchise Disclosure Document, the enforceability of liquidated damages provisions within the Franchise Agreement is restricted in Indiana. Specifically, Indiana Code section 23-2.2.7-1(10) is interpreted by the Indiana Secretary of State to prohibit contract provisions regarding liquidated damages. Consequently, the FDD states that any liquidated damages clauses in the Ledgers Franchise Agreement may not be enforceable in Indiana. This means that if Ledgers seeks to enforce such provisions against a franchisee in Indiana, a court might deem them invalid.

This provision is significant for prospective Ledgers franchisees in Indiana because it affects the financial consequences of terminating the franchise agreement. Liquidated damages are predetermined amounts designed to compensate the franchisor for losses resulting from early termination or breach of contract by the franchisee. If these provisions are unenforceable, Ledgers may need to pursue actual damages, which require proving the specific financial harm suffered, a potentially more complex and uncertain legal process.

For a prospective franchisee, this could mean greater protection against potentially high, pre-set penalties for ending the agreement early. However, it does not eliminate the franchisee's responsibility for actual damages resulting from a breach. It is important for potential franchisees to understand that while liquidated damages might not be enforceable, Ledgers could still pursue a claim for the actual financial losses they incur.

Therefore, it is advisable for prospective Ledgers franchisees in Indiana to seek legal counsel to fully understand the implications of this state-specific modification to the Franchise Agreement. Understanding the difference between liquidated damages and actual damages, and the potential liabilities under each scenario, is crucial for making an informed investment decision.