Does 1 800 Packouts have the right to exclude certain assets from the purchase of my 1 800 Packouts franchise?
1_800_Packouts Franchise · 2025 FDDAnswer from 2025 FDD Document
OF AMOUNTS OWED TO US**
You agree to pay us within 10 days after the effective date of termination or expiration of this Agreement, or such later date that the amounts due to us are determined, such Royalty Fees, Marketing Fees, amounts owed for purchases by you from us or our affiliates, interest due on any of the foregoing and all other amounts owed to us or our affiliates which are then unpaid.
B. OUR RIGHT TO PURCHASE ASSETS
- (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.
Source: Item 23 — RECEIPT (FDD pages 67–238)
What This Means (2025 FDD)
According to the 2025 1 800 Packouts Franchise Disclosure Document, upon termination or expiration of the franchise agreement (under specific conditions), 1 800 Packouts has the option to purchase certain assets of the franchised business. This includes inventory, supplies, operating assets, and other assets used in the operation of the franchised business. However, 1 800 Packouts retains the unrestricted right to exclude any assets it specifies from this purchase.
This means that if a franchisee's agreement is terminated for reasons other than the franchisee choosing to terminate it, or if the agreement expires without renewal, 1 800 Packouts can choose which assets it wants to buy back. The franchisee must provide financial statements and allow inspections to help 1 800 Packouts decide. This clause gives 1 800 Packouts significant control over which assets they acquire, potentially leaving the franchisee with assets that are difficult to liquidate or repurpose.
For a prospective franchisee, this highlights the importance of understanding the conditions under which the franchise agreement can be terminated or expire. It also underscores the need to maintain detailed records of all assets and their condition, as these will be subject to inspection and valuation if 1 800 Packouts chooses to exercise its purchase option. The franchisee should also consider the potential implications of being left with unsold assets and factor this risk into their financial planning.
It is also important to note that 1 800 Packouts can assign its rights to purchase these assets to another entity, which could be an affiliate. This adds another layer of complexity, as the franchisee may be dealing with a different party during the asset purchase process. The franchisee should seek legal counsel to fully understand their rights and obligations under this section of the franchise agreement.