For Mr. Sandless, what is the basis for calculating the liquidated damages owed upon termination of the agreement?
Mr_Sandless Franchise · 2025 FDDAnswer from 2025 FDD Document
Upon breach, early termination or upon termination of this Agreement according to its terms and conditions, you agree to pay to us within fifteen (15) days after the effective date of this Agreement's termination, in addition to reasonable attorney's fees and the amounts owed hereunder, liquidated damages equal to the average monthly Royalty Fees you paid during the twelve (12) months of operation preceding the effective date of termination multiplied by (a) twenty-four (24) (being the number of months in two (2) full years), or (b) the number of months remaining in the Agreement had it not been terminated, whichever is higher.
The parties hereto acknowledge and agree that it would be impracticable to determine precisely the damages we would incur from this Agreement's termination and the loss of cash flow from Royalty Fees due to, among other things, the complications of determining what costs, if any, we might have saved and how much the Royalty Fees would have grown over what would have been this Agreement's remaining term. The parties hereto consider this liquidated damages provision to be a reasonable, good faith preestimate of those damages.
The liquidated damages provision only covers our damages from the loss of cash flow from the Royalty Fees. It does not cover any other damages, including damages to our reputation with the public and landlords and damages arising from a violation of any provision of this Agreement other than the Royalty Fee section. You and each of your owners agree that the liquidated damages provision does not
give us an adequate remedy at law for any default under, or for the enforcement of, any provision of this Agreement other than the Royalty Fee section.
Source: Item 22 — CONTRACTS (FDD page 42)
What This Means (2025 FDD)
According to Mr. Sandless's 2025 Franchise Disclosure Document, franchisees may owe liquidated damages upon early termination or breach of the franchise agreement. These damages are calculated to compensate Mr. Sandless for the loss of future royalty fees.
The liquidated damages are equal to the average monthly Royalty Fees paid by the franchisee during the 12 months of operation preceding the termination date. This average is then multiplied by either (a) 24, representing two full years, or (b) the number of months remaining in the agreement had it not been terminated, whichever is higher. The franchisee must pay this amount to Mr. Sandless within 15 days of the termination date, in addition to any reasonable attorney's fees and other amounts owed under the agreement.
The FDD clarifies that this liquidated damages provision specifically addresses the loss of cash flow from Royalty Fees and does not cover other potential damages, such as harm to Mr. Sandless's reputation or losses resulting from violations of other agreement provisions. The document states that Mr. Sandless does not consider this provision an adequate remedy for defaults beyond the Royalty Fee section, indicating that they may pursue additional legal remedies for other breaches of the agreement.