When are liquidated damages due to Mr. Sandless after termination?
Mr_Sandless Franchise · 2025 FDDAnswer from 2025 FDD Document
Note 7 – Liquidated Damages. If we terminate your Franchise Agreement for cause, you must pay us within 15 days after the effective date of termination liquidated damages equal to the average monthly Royalty Fees you paid to us during the 12 months of operation preceding the effective date of termination multiplied by (a) 24 (being the number of months in two full years), or (b) the number of months remaining in the Agreement had it not been terminated, whichever is higher.
Source: Item 6 — OTHER FEES (FDD pages 10–13)
What This Means (2025 FDD)
According to Mr. Sandless's 2025 Franchise Disclosure Document, if Mr. Sandless terminates a Franchise Agreement for cause, the franchisee must pay liquidated damages within 15 days after the effective date of termination. The amount of these damages will vary depending on the specific circumstances outlined in Note 7 of Item 6.
Note 7 specifies that the liquidated damages will be equal to the average monthly Royalty Fees paid to Mr. Sandless during the 12 months of operation preceding the termination date. This average is then multiplied by either 24 (representing two full years) or the number of months remaining in the agreement had it not been terminated, whichever calculation results in the higher amount.
This means that a franchisee who is terminated for cause could owe Mr. Sandless a substantial sum, potentially covering up to two years' worth of royalty fees. This provision is designed to compensate Mr. Sandless for the lost future revenue resulting from the termination of the franchise agreement. Prospective franchisees should carefully consider this potential liability and factor it into their financial planning.