Under what condition must a Nothing Bundt Cakes franchisee pay liquidated damages?
Nothing_Bundt_Cakes Franchise · 2025 FDDAnswer from 2025 FDD Document
Fund in subsequent year(s). Upon written request, we will make available an annual, unaudited statement of contributions and expenditures for the Funds within 120 days of the end of the fiscal year.
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- Upon termination of your Franchise Agreement for cause before its scheduled expiration date, you must pay to us in a lump sum, within 15 days after the effective date termination, liquidated damages equal to the product of the average Royalties, Marketing Production Fund contributions and Paid Media Fund contributions (collectively, "Royalties and Contributions") that you were obligated to pay us on the Bakery's Net Revenues for each 4 week period during the 24 months of operation preceding the effective date of termination multiplied by twenty-six (26) (the number of four-week periods during two (2) full years) or the number of weeks that would have remained in the term of
Source: Item 6 — OTHER FEES (FDD pages 23–30)
What This Means (2025 FDD)
According to Nothing Bundt Cakes's 2025 Franchise Disclosure Document, a franchisee must pay liquidated damages if the Franchise Agreement is terminated for cause before its scheduled expiration date. The franchisee must pay a lump sum within 15 days after the termination date.
The liquidated damages are calculated by multiplying the average Royalties, Marketing Production Fund contributions, and Paid Media Fund contributions that the franchisee was obligated to pay on the Bakery's Net Revenues for each 4-week period during the 24 months of operation preceding the termination date. This amount is then multiplied by 26 (the number of four-week periods during two full years) or the number of weeks that would have remained in the term of the Franchise Agreement as of the termination date, whichever is shorter.
The FDD stipulates that the liquidated damages payable will not exceed $125,000 per Bakery. This provides a cap on the amount a franchisee might owe in liquidated damages, even if the calculated amount based on the formula is higher. This payment is compensation for the early termination of the agreement and is in addition to any other amounts owed to Nothing Bundt Cakes as of the termination date, as well as the franchisee's post-termination obligations.