Under what circumstances does 1 800 Packouts have the option to purchase assets of the Franchised Business?
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.
- (2) While we are deciding whether to exercise our option under this Section B. (Our Right to Purchase Assets), and, if we do exercise that option, during the period beginning with our delivery of the Exercise Notice and continuing through the closing of our purchase or our decision not to complete the purchase, you must continue to operate the Franchised Business in accordance with this Agreement. However, we may, at any time during that period, assume the management of the Franchised Business
ourselves or appoint a third party (who may be our affiliate) to manage the Franchised Business pursuant to the terms of Section -8.
- (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 the 2025 FDD, 1 800 Packouts has the option to purchase the assets of a franchised business under specific circumstances related to the termination or expiration of the franchise agreement. Specifically, if the franchise agreement is terminated for any reason other than the franchisee terminating it, or if the agreement expires without a successor agreement being signed by both parties, 1 800 Packouts can exercise its option to purchase the designated assets.
To exercise this option, 1 800 Packouts must provide written notice within 15 days of the termination or expiration date. The assets subject to purchase include inventory, supplies, operating assets, and other assets used in the franchised business. However, 1 800 Packouts retains the right to exclude any assets from the purchase. This also extends to the facility where the business operates; 1 800 Packouts can elect to purchase the facility or lease it from the franchisee (or their affiliate) under commercially reasonable terms, including potential renewal options. 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.
During the period when 1 800 Packouts is deciding whether to exercise its purchase option, and if it does exercise the option, until the purchase is complete, the franchisee must continue to operate the business according to the franchise agreement. However, 1 800 Packouts has the right to assume management of the franchised business during this period or appoint a third party to do so. This provision ensures the continued operation of the business during the transition period, but it also places the franchisee under the direction of 1 800 Packouts during this time.
The purchase price for the assets will be based on their fair market value for use in a competitive business, but excluding any value associated with the franchise rights, goodwill, trademarks, confidential information, or other intellectual property of 1 800 Packouts. The useful life of equipment is capped at three years for valuation purposes. If the parties cannot agree on the fair market value, an independent appraiser will be selected to determine the final purchase price. 1 800 Packouts can offset any amounts owed by the franchisee against the purchase price and is entitled to customary representations, warranties, and indemnities in the asset purchase.