Does the liquidated damages provision in the Mr. Sandless agreement cover damages to the brand's reputation?
Mr_Sandless Franchise · 2025 FDDAnswer from 2025 FDD Document
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 the 2025 Mr. Sandless Franchise Disclosure Document, the liquidated damages provision in the franchise agreement does not cover damages to the brand's reputation. The document specifies that the liquidated damages provision is designed to address the loss of cash flow from Royalty Fees resulting from the agreement's termination.
Specifically, the Mr. Sandless franchise agreement states that the liquidated damages provision is intended to be a reasonable, good faith pre-estimate of damages from the loss of cash flow from Royalty Fees. However, it explicitly excludes coverage for other types of damages, including those related to the brand's reputation with the public and landlords. It also excludes damages arising from violations of any provision of the agreement other than the Royalty Fee section.
This means that if a franchisee breaches the agreement in a way that harms the Mr. Sandless brand's reputation, the franchisor would need to pursue remedies outside of the liquidated damages provision to recover losses associated with that damage. The agreement clarifies that the liquidated damages provision does not provide an adequate legal remedy for defaults or enforcement of provisions other than those related to Royalty Fees. This may involve separate legal action to seek compensation for reputational harm or other breaches of contract terms.