Are the liquidated damages for violating confidentiality or non-competition covenants considered a penalty under the Pearce Bespoke franchise agreement?
Pearce_Bespoke Franchise · 2025 FDDAnswer from 2025 FDD Document
ctive relief will be entered by a court of competent jurisdiction enforcing the non-competition covenants without Franchisor posting any bond or security, in addition to all other remedies that may be available to Franchisor at equity or law.
E. Liquidated Damages – Violation of Confidentiality or Non-Competition Covenants. In the event Franchisee violates the covenants of confidentiality and/or non-competition set forth herein, Franchisee shall pay Franchisor a lump sum payment (as liquidated damages and not as a penalty) an amount equal to One Hundred Thousand Dollars ($100,000.00), plus Franchisor's attorney's fees, for each such violation. Franchisee acknowledges that a precise calculation of the full extent of the damages that Franchisor will incur in the event of Franchisee's violation of the covenants of confidentiality and/or non-competition is difficult to determine and that this lump sum payment is reasonable in light thereof. The liquidated damages payable
Source: Item 22 — CONTRACTS (FDD page 39)
What This Means (2025 FDD)
According to Pearce Bespoke's 2025 Franchise Disclosure Document, the franchise agreement specifies that liquidated damages for violating confidentiality or non-competition covenants are not considered a penalty. Instead, the agreement explicitly states that such payments are liquidated damages.
Specifically, if a franchisee violates the confidentiality or non-competition agreements, they must pay Pearce Bespoke a lump sum of $100,000, in addition to Pearce Bespoke's attorney's fees for each violation. The Pearce Bespoke franchise agreement states that this amount is considered liquidated damages, not a penalty.
Pearce Bespoke includes this clause because accurately calculating the full extent of damages from a confidentiality or non-competition breach is difficult. The $100,000 payment is deemed a reasonable estimate of the potential harm to Pearce Bespoke. This payment is in addition to any other amounts owed under the agreement, and it does not limit Pearce Bespoke's right to seek injunctive relief or other remedies.