The conclusion that BKC was entitled to lost future royalties was unfortunately only the first half of the analysis. As with McAlpine, the actual calculation of the award of arbitration became the most important subject and, ultimately, BKC`s inability to obtain a reasonably reliable estimate of its damages became a non-coup. In trying to determine the amount of damage, the court asked BKC to show the shortfall that BKC expected from the four subsidiaries – the shortfall in royalties, net of the costs that BKC had saved by not making the closed restaurants work. [FN28] On this point, a representative of BKC stated that BKC, like most franchisors, had not allocated its expenses per franchise restaurant, so that BKC could not provide the court with the requested information. [FN29] Accordingly, the Tribunal found that, even though the debtor had an obligation 118 to operate the restaurants and that BKC had suffered damages, the future recovery of the royalties failed because the award was too speculative, with no evidence of cost reduction. [FN30] If BKC had been able to prove its savings, it would probably have received lost future royalties. During the 1997-2015 period, the licence rate of the Krispy Kreme franchise and the royalties on trademarks did not change. From July 2019, the deductible rate will remain the same. In splitting the structure of profit licenses, the total gain of a franchisee in a distribution between the franchisor and the franchisee at an agreed percentage, such as 40/60. Although the royalty profit split is unusual, as it is less favored by franchisees.
It`s easy. The royalty rate for deductibles is 4.5% of sales. The royalty for brands is 2% of sales. In this case, 44% of franchise fees are for brands. This percentage and broad usage parameters provide an overview of trademark royalty rates in areas where market-based transactions are limited. Contact Lusthaus Law for advice on your franchise agreement. The case law relating to a franchisor`s right to compensation for lost future royalties remains unclear. Despite the 121 political concerns expressed by the courts about the loss of future royalties, franchisors continue to rely on the nature of the franchise relationship, the fundamental right of contracts and the language of the franchise agreement itself to base their claims. As more and more franchisors demand the full extent of their contractual rights, the possibility of developing a coherent law on royalties lost in the future continues to grow. Franchise termination cases are familiar ground for experienced franchise lawyers. The complaint generally relates to termination of the franchise agreement, the application of a non-compete agreement, damages and claims for omission in the event of trademark infringement, damages for outstanding amounts under the franchise agreement, and a tally for sales that have not been reported to the franchisor.
Once the franchisee has ceased operations, the centre of gravity of the case will be significantly reduced. These cases may simply include the recovery of amounts incurred under the franchise agreement, including legal fees, fees, payments to third parties, lease payments and all amounts incurred under a mention. In preparing these infringement cases, the franchisor often seeks remedies that put its customers in the position they would have occupied if the franchisees had not fulfilled their contractual obligations until the time of termination. However, by limiting potential damages, legal counsel may ignore a significant portion of the damage suffered by franchisors as a result of the early termination of franchise agreements – “waiting damages” in the form of future royalty losses. Accordingly, according to McAlpine, a franchisor`s right to recover future royalties lost in less monstrous circumstances was unclear.