When 1 800 Packouts purchases assets, what is the basis for determining the purchase price?
1_800_Packouts Franchise · 2025 FDDAnswer from 2025 FDD Document
(3) The purchase price for the Purchased Assets will be their fair market value for use in the operation of a Competitive Business (but not a Franchised Business).
However, the purchase price will not include any value for any rights granted by this Agreement, goodwill attributable to the Marks, our brand image, any Confidential Information or our other intellectual property rights, or participation in the network of Franchised Businesses.
For purposes of determining the fair market value of all equipment used in operating the Franchised Business, the equipment's useful life shall be determined to be no more than three years.
If we and you cannot agree on fair market value for the Purchased Assets, we will select an independent appraiser after consultation with you, and his or her determination of fair market value will be the final and binding purchase price.
- (4) If we elect to exercise our purchase option, we will pay the purchase price at the closing, which will take place within 60 days after the purchase price is determined, although we may decide after the purchase price is determined not to complete the purchase.
We may set off against the purchase price, and reduce the purchase price by, any and all amounts you owe us or our affiliates.
We are entitled to all customary representations, warranties and indemnities in our asset purchase, including representations and warranties as to ownership and condition of, and title to, assets, liens and encumbrances on assets, validity of contracts and agreements, and liabilities affecting the assets, contingent or otherwise, and indemnities for all actions, events and conditions that existed or occurred in connection with the Franchised Business or your business prior to the closing of our purchase.
Source: Item 23 — RECEIPT (FDD pages 67–238)
What This Means (2025 FDD)
According to 1 800 Packouts's 2025 Franchise Disclosure Document, the purchase price for assets will be their fair market value for use in operating a Competitive Business, but not a Franchised Business. This means the assets are valued based on what they would be worth to someone running a similar, but non-franchised, business. The purchase price will not include any value for rights granted by the Franchise Agreement, goodwill attributable to the Marks, 1 800 Packouts's brand image, any Confidential Information, intellectual property rights, or participation in the network of Franchised Businesses.
For equipment used in operating the Franchised Business, the equipment's useful life will be determined to be no more than three years when determining fair market value. This depreciation timeline could significantly impact the valuation of equipment, potentially lowering the price 1 800 Packouts pays.
If the franchisee and 1 800 Packouts cannot agree on the fair market value for the Purchased Assets, 1 800 Packouts will select an independent appraiser after consulting with the franchisee. The appraiser's determination of fair market value will be the final and binding purchase price. 1 800 Packouts will pay the purchase price at the closing, which will occur within 60 days after the purchase price is determined. However, 1 800 Packouts may decide not to complete the purchase even after the price is determined. 1 800 Packouts can also reduce the purchase price by any amounts the franchisee owes to 1 800 Packouts or its affiliates.
1 800 Packouts is entitled to customary representations, warranties, and indemnities in their asset purchase. This includes assurances regarding ownership, condition, and title to assets, liens and encumbrances, validity of contracts, and liabilities affecting the assets. The franchisee must also provide indemnities for actions, events, and conditions that occurred in connection with the Franchised Business prior to the closing of the purchase.