What damages are available to franchisors who have been harmed by franchisees?
Minneapolis franchise law attorney Kirk Reilly discusses remedies for franchisors when wronged by franchisees.
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Well, in our world this question has to deal with what kind of damages do franchisors typically get in cases with their franchisees, and generally it’s a contract. It’s a breach of contract, and for whatever reason the franchisee has violated it. Either they haven’t paid you, or they have not followed your standards in how they either cook the food or keep the rooms, and there has to be a termination. When there’s a termination, the franchisor is typically entitled to breach of contract damages, which are how much money did they owe you at the time it terminated and how much money do they owe you over the remaining course of the contract, multiple years. There are past damages and future damages. So what we typically look at, and the bigger numbers, are future damages.
And some clients have what’s called liquidated damages in their contracts, which is a set amount that the parties agreed to beforehand, and if they don’t, and if the state law allows it, you’re entitled to your lost future royalties, which is a little more difficult. But those are generally the types of damages that a franchisor is entitled to when the franchisee breaches the contract.