What are the consequences if a My Salon Suite franchisee understates royalty or advertising payments by more than 2%?
My_Salon_Suite Franchise · 2025 FDDAnswer from 2025 FDD Document
- B. Early Termination Damages. If Franchisor terminates this Franchise Agreement as a result of Franchisee's breach, Franchisee and Franchisor agree that the amount of damages which Franchisor would incur for any such early termination would be difficult, if not impossible, to accurately ascertain. Accordingly, within thirty (30) days following such termination, Franchisee shall pay Franchisor an amount equal to the greater of (i) the average monthly Royalty Fees and Brand Building Fund Contributions that Franchisee owed to Franchisor for the past twenty- four (24) months multiplied by the lesser of thirty-six (36) or the number of months remaining in the Term; or (ii) the average monthly Royalty Fees and Fund Contributions paid by all franchised My Salon Suite businesses who have operated for the past twenty-four (24) months multiplied by the lesser of thirty-six (36) or the months remaining in the Term ("Early Termination Damages"). If Franchisee has not operated the Franchised Business for twenty-four (24) months prior to the termination of this Franchise Agreement, the Early Termination Damages will be calculated by using the average monthly Royalty Fees and Fund Contributions from all franchised My Salon Suite businesses who have operated for the past twenty-four (24) months multiplied by thirty-six (36). These Early Termination Damages shall constitute liquidated damages and are not to be construed as a penalty and shall be the joint and several liability of Franchisee and each of Franchisee's Owners who personally guarantee Franchisee's obligations under this Franchise Agreement.
Source: Item 23 — RECEIPTS (FDD pages 95–230)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, the document does not specify the consequences if a My Salon Suite franchisee understates royalty or advertising payments by more than 2%. The FDD does outline the potential damages My Salon Suite may incur if the franchise agreement is terminated due to a breach by the franchisee.
Specifically, within 30 days following termination, the franchisee must pay My Salon Suite the greater of two amounts as Early Termination Damages. The first is the average monthly Royalty Fees and Brand Building Fund Contributions that the franchisee owed for the past 24 months, multiplied by the lesser of 36 or the number of months remaining in the term. The second calculation is the average monthly Royalty Fees and Fund Contributions paid by all franchised My Salon Suite businesses who have operated for the past 24 months, multiplied by the lesser of 36 or the months remaining in the Term.
If the franchisee has not operated for 24 months prior to termination, the Early Termination Damages will be calculated using the average monthly Royalty Fees and Fund Contributions from all franchised My Salon Suite businesses who have operated for the past 24 months, multiplied by 36. These Early Termination Damages are considered liquidated damages and are not a penalty. The franchisee and any owners who personally guarantee the franchisee's obligations are jointly and severally liable for these damages.
To fully understand the consequences of understating royalty or advertising payments, a prospective franchisee should ask the franchisor for clarification on this specific scenario and ensure it is clearly defined in the franchise agreement.