If Alloy purchases the assets of a terminated franchisee's facility, is the price based on the assets' continuing use?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
B. Purchase Option. We have the right to purchase or designate a third party that will purchase all or any portion of the assets of your Facility that are owned by you or any of your affiliates including, without limitation, the premises, building, equipment, fixtures, signage, furnishings, supplies, leasehold improvements, and inventory of the Facility at a price determined by a qualified appraiser (or qualified appraisers if one party believes it is better to have a real estate appraiser appraise the value of the land and building and a business appraiser appraise the Facility's other assets) selected with the consent of both parties, provided we give you written notice of our preliminary intent to exercise our purchase rights under this Paragraph within 30 days after the date of the expiration or termination of this Agreement, or the expiration of any Interim Period. If the parties cannot agree upon the selection of an appraiser(s), one or both will be appointed by a Judge of the United States District Court for the District in which the Facility is located upon petition of either party.
The price determined by the appraiser(s) will be the reasonable fair market value of the assets based on their continuing use in, as, and for the operation of a ALLOY Facility and the appraiser will designate a price for each category of asset (e.g., land, building, equipment, fixtures, etc.), but shall not include the value of any goodwill of the business, as the goodwill of the business is attributable to the Trademarks and the System.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, if Alloy exercises its right to purchase the assets of a franchisee's facility after termination, the price will be based on the fair market value of the assets. This valuation considers their continued use as an Alloy facility.
The determination of the asset price involves a qualified appraiser selected with the consent of both Alloy and the franchisee. If both parties cannot agree on an appraiser, a judge from the United States District Court for the district where the facility is located will appoint one or more appraisers. The appraiser will designate a price for each asset category, such as land, building, equipment, and fixtures.
However, the appraisal specifically excludes the value of any goodwill associated with the business. Alloy attributes the goodwill to its trademarks and the overall Alloy system, not to the individual franchisee's operation. This means that the franchisee will not be compensated for the brand recognition or customer base they may have built.
This valuation method ensures that the franchisee receives fair market value for tangible assets, but it also protects Alloy's brand equity by not compensating franchisees for goodwill. Prospective franchisees should understand this policy, as it affects the potential return on investment if Alloy decides to purchase the facility's assets upon termination.