Does the Red Wagon Club franchise agreement address lost revenue damages, and if so, where?
Red_Wagon_Club Franchise · 2024 FDDAnswer from 2024 FDD Document
18.H. LOST REVENUE DAMAGES.
If Franchisor terminates this Agreement because of Franchisee's breach or if Franchisee terminates this Agreement without cause, Franchisee and Franchisor agree that it would be difficult, if not impossible, to determine the amount of damages that Franchisor would suffer due to the loss or interruption of the revenue stream Franchisor otherwise would have derived from Franchisee's continued payment of Program Fees and the Brand Fund contributions, less any cost savings, through the remainder of the Term (the "Lost Revenue Damages"). Franchisee and Franchisor agree that a reasonable estimate of the Lost Revenue Damages is, and Franchisee agrees to pay Franchisor as compensation for the Lost Revenue Damages, an amount equal to the then net present value of the Program Fees and the Brand Fund contributions that would have become due had this Agreement not been terminated, from the date of termination to the earlier of: (a) two (2) years following termination or (b) the scheduled expiration of the then-current Term (the "Measurement Period"). For this purpose, Lost Revenue Damages shall be calculated by multiplying (i) the number of calendar months in the Measurement Period by (ii) the aggregate of the then-current monthly Program Fees and Brand Fund contributions. Franchisee and Franchisor agree that the calculation described in this Section is a calculation only of the Lost Revenue Damages and that nothing herein shall preclude or limit Franchisor from proving and recovering any other damages caused by Franchisee's breach of this Agreement.
Franchisee agrees to pay Franchisor Lost Revenue Damages, as calculated in accordance with this Section, within 15 days after this Agreement is terminated, or on any later date that Franchisor determines. Franchisee and Franchisor agree that the calculation described in this Section is a calculation only of the Lost Revenue Damages and that nothing herein shall preclude or limit Franchisor from proving and recovering any other damages caused by Franchisee's breach of the Agreement.
Source: Item 22 — CONTRACTS (FDD page 47)
What This Means (2024 FDD)
According to the 2024 Red Wagon Club Franchise Disclosure Document, the franchise agreement does address lost revenue damages in section 18.H. If the agreement is terminated due to the franchisee's breach or if the franchisee terminates the agreement without cause, the franchisee will be responsible for paying Red Wagon Club lost revenue damages.
The document states that calculating the exact amount of damages Red Wagon Club would suffer due to the loss of revenue from program fees and brand fund contributions would be difficult to determine. Therefore, the agreement stipulates that a reasonable estimate of these lost revenue damages will be calculated as the net present value of the program fees and brand fund contributions that would have been due from the termination date until either two years following termination or the scheduled expiration of the current term, whichever comes first. This "Measurement Period" is used to calculate the damages.
The calculation involves multiplying the number of calendar months in the Measurement Period by the combined monthly program fees and brand fund contributions at the time of termination. The franchisee is required to pay this amount within 15 days of termination, or on a later date determined by Red Wagon Club. The agreement specifies that this calculation only covers lost revenue damages and does not prevent Red Wagon Club from pursuing additional damages caused by the franchisee's breach.