Under what circumstances does the buyout option NOT apply to a 1 800 Packouts franchise agreement?
1_800_Packouts Franchise · 2025 FDDAnswer from 2025 FDD Document
except as set forth in Section -8 (our assumption of management)) following our exercise of any of these rights. If we exercise any of our rights under Section C., we may thereafter terminate this Agreement without providing you any additional corrective or cure period, unless the default giving rise to our right to terminate this Agreement has been cured to our reasonable satisfaction.
E. BUYOUT
If you and we mutually agree to terminate this Agreement, and you are not at such time in material breach of any of your obligations under this Agreement or any other agreement with us, you pay us all amounts owed prior to termination, you pay us the Buyout Fee described in this Section E and you and your Owners execute a general release, in a form prescribed by us, of any claims against us and our affiliates, and our and their officers, directors, agents and employees, we will waive the restriction in Section -1(a) prohibiting you and your Owners from directly or indirectly having any involvement in any Competitive Business after the termination of this Agreement. The "Buyout Fee" shall be equal to an initial franchise fee of Sixty Thousand Dollars ($60,000) plus an additional fee of Two-Thousand Five Hundred Dollars ($2,500) per month for each month remaining on the term of your franchise agreement.
Source: Item 23 — RECEIPT (FDD pages 67–238)
What This Means (2025 FDD)
According to 1 800 Packouts's 2025 Franchise Disclosure Document, the buyout option, which allows a franchisee to terminate the agreement early and waive certain post-termination restrictions, does not apply under specific circumstances. The buyout option is unavailable if the franchise agreement is transferred to a new franchisee. Additionally, the buyout option is not applicable if 1 800 Packouts terminates the franchise agreement for cause, meaning due to the franchisee's breach of the agreement.
To exercise the buyout option, the franchisee must not be in material breach of the franchise agreement or any other agreement with 1 800 Packouts. The franchisee must also pay all outstanding amounts owed to 1 800 Packouts before the termination date. Furthermore, the franchisee is required to pay a "Buyout Fee" which is calculated as an initial franchise fee of $60,000, plus an additional $2,500 for each month remaining on the franchise agreement term.
Finally, the franchisee and their owners must execute a general release of any claims against 1 800 Packouts and its affiliates, including their officers, directors, agents, and employees. Even if the buyout option is exercised, the franchisee and their owners are still restricted from soliciting for employment any person who has been employed by 1 800 Packouts, its affiliates, or any of its franchisees within the immediate past 12 months, for a period of two years after the termination of the agreement.