What are 'Purchased Assets' as defined in 1 800 Packouts' Franchise Agreement?
1_800_Packouts Franchise · 2025 FDDAnswer from 2025 FDD Document
(1) Upon termination of this Agreement for any reason (other than your termination in accordance with Section A. (By Franchisee)) or expiration of this Agreement without our and your signing a successor franchise agreement, we have the option, exercisable by giving you written notice within 15 days after the date of termination or expiration (the "Exercise Notice"), to purchase the inventory, supplies, Operating Assets, and other assets used in the operation of the Franchised Business that we designate (the "Purchased Assets"). We have the unrestricted right to exclude any assets we specify relating to the Franchised Business from the Purchased Assets and not acquire them. You agree to provide us the financial statements and other information we reasonably require, and to allow us to inspect the Franchised Business and its assets, to determine whether to exercise our option under this Section B. If you or one of your affiliates owns the Facility, we may elect to include a fee simple interest in the Facility and its premises as part of the Purchased Assets or, at our option, lease the Facility from you or that affiliate for an initial five-year term with one renewal term of five years (at our option) on commercially reasonable terms. You (and your Owners) agree to cause your affiliate to comply with these requirements. If you lease the Facility from an unaffiliated lessor, you agree (at our option) to assign the lease to us or to enter into a sublease for the remainder of the lease term on the same terms (including renewal options) as the lease.
Source: Item 23 — RECEIPT (FDD pages 67–238)
What This Means (2025 FDD)
According to the 2025 1 800 Packouts Franchise Disclosure Document, 'Purchased Assets' are defined within the context of 1 800 Packouts' option to purchase a franchisee's assets upon termination or expiration of the franchise agreement. Specifically, if the agreement is terminated for any reason other than the franchisee choosing to terminate it, or if the agreement expires without renewal, 1 800 Packouts has the option to buy certain assets. These assets include the inventory, supplies, operating assets, and other assets used in the operation of the franchised business that 1 800 Packouts designates.
1 800 Packouts retains the right to exclude any assets related to the franchised business from the 'Purchased Assets,' meaning they can choose not to acquire them. If the franchisee or an affiliate owns the facility where the 1 800 Packouts business operates, 1 800 Packouts can elect to include the property as part of the Purchased Assets or lease it from the franchisee or their affiliate. If the franchisee leases the facility from an unaffiliated lessor, 1 800 Packouts can choose to have the lease assigned to them or enter into a sublease under the same terms as the original lease.
This clause in the franchise agreement has significant implications for a prospective 1 800 Packouts franchisee. Upon termination or non-renewal (under the specified conditions), the franchisee may be required to sell business assets to 1 800 Packouts. The franchisee does not have full control over which assets 1 800 Packouts chooses to purchase. The FDD specifies that 1 800 Packouts has the unrestricted right to exclude assets. This could impact the franchisee's ability to recoup their initial investment in assets if the franchise relationship ends. It is important to note that the purchase price for these assets will be their fair market value for use in a competitive business, but excluding any value associated with the 1 800 Packouts brand or intellectual property.