How is the liquidated damages amount calculated for premature termination of a Stretch Zone franchise agreement due to franchisee default?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
If we terminate this Agreement due to your default, in addition to all amounts you owe us at the time of termination, you will also pay us a lump sum payment (as liquidated damages for causing the premature termination of this Agreement and not as a penalty) equal to the total of all Royalty Fees and Advertising Contributions for: (i) the 36 calendar months of operation of your Franchise Business preceding the termination; (ii) the period of time your Franchise Business has been in operation preceding the termination, if fewer than 36 calendar months, projected on a 36-calendar-
month basis; or (iii) any shorter period that equals the unexpired period of the Initial Term. The parties agree that a precise calculation of the full extent of the damages that we will incur on termination of this Agreement as a result of your default is difficult to calculate and the parties desire certainty in this matter. The parties agree that the lump sum payment is reasonable in light of the damages for premature termination that we will incur in this event. You are also liable for prejudgment and post-judgment interest and our attorneys' fees and costs. Other than a claim for monetary damages or lost profits, this payment is not exclusive of any other remedies that we have including a right to injunctive relief. This payment does not relieve you from your obligations that survive the termination or expiration of this Agreement including the obligations of indemnification, confidentiality and non-competition.
Source: Item 8 — Receipts. Any sale made must be in compliance with § 683(8) of the Franchise Sale Act (N.Y. Gen. Bus. L. § 680 et seq.), which describes the time period a Franchise Disclosure Document (offering prospectus) must be provided to a prospective franchisee before a sale may be made. New York law requires a franchisor to provide the Franchise Disclosure Document at the earliest of the first personal meeting or ten (10) business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship. (FDD pages 99–263)
What This Means (2025 FDD)
According to the 2025 Stretch Zone Franchise Disclosure Document, if Stretch Zone terminates the Franchise Agreement due to the franchisee's default, the franchisee must pay a lump sum as liquidated damages. This lump sum is not a penalty but rather compensation for the premature termination.
The liquidated damages are calculated based on the total of all Royalty Fees and Advertising Contributions. The calculation considers three scenarios: (i) the 36 calendar months of operation preceding the termination; (ii) if the business has been in operation for fewer than 36 months, the amount is projected on a 36-month basis; or (iii) any shorter period that equals the unexpired period of the Initial Term.
In addition to the liquidated damages, the franchisee is liable for prejudgment and post-judgment interest, as well as Stretch Zone's attorneys' fees and costs. This payment does not exclude Stretch Zone from seeking other remedies, such as injunctive relief, except for claims for monetary damages or lost profits. The franchisee remains responsible for obligations that survive termination, including indemnification, confidentiality, and non-competition agreements.