An arbitration panel in Florida found that a disaster recovery and remediation business franchisee breached his agreement with John Woods, his franchisor, by terminating the agreement 13 years before expiration of the 20-year term. The arbitrators awarded John Woods damages for the future profits it would have earned had the franchisee remained in operation because:

(1) the lost future profits were within the reasonable contemplation of the parties at the time of contracting and

(2) they were proven with reasonable certainty.

The arbitrators found that lost future profits were within the contemplation of the franchisee when signing the franchise agreement even if the potential payment of these damages was not disclosed in the FDD. Rejecting the franchisee's expert testimony, the panel found that future damages were not a fee or one of the franchisee's duties upon termination that were required to be disclosed in the franchisor's FDD. The panel also found that Florida law did not require an explicit reference in the parties' contract to reserve the franchisor's right to lost future profits.

The arbitrators further found that the franchisor proved its damages with reasonable certainty by calculating as past damages the lost profits the franchisor had incurred from the date of termination through the date of the hearing, and for future profits, by analyzing the franchisee's past revenues and assuming the franchisee would generate similar revenues in the future with a modest increase in the first few years. In all, the arbitrators awarded the franchisor past due fees as well as lost future profits in the amount of $908,903 for the remaining 13 years of the term of the franchise agreement.

The arbitrators' ruling demonstrates a danger for franchisees unilaterally terminating a franchise agreement when the agreement does not provide such a right. The ruling also provides franchisors significant ammunition for recovering future damages against a franchisee who fails to perform pursuant to the agreement.