In the event that Auntie Annes exercises its option to purchase my business, what assets are included in the purchase?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in Franchise Agreement | Summary |
|---|---|---|
| o. You must comply with our right of first refusal. p. If you operate a Co-Branded Shop, the Co-Branded Agreement or Co- Branded Franchise are transferred at the same time. | ||
| FA: 16.4 (non-control transfers) | a. You give us prior written notice of the transfer. b. You pay all sums owed. c. You are not in default d. Transferee meets qualifications e. Transferee signs assignment and guaranty f. You and your guarantors and owners sign a general release. g. You remain liable for pre-Transfer obligations. h. You pay us a Transfer Fee. | |
| FA: 16.5 (related party transfers) | a. You give us prior written notice of the transfer. b. You are not in default c. Transferee meets qualifications d. Transferee assumes in writing the Franchise Agreement and the guaranty. e. You may not be in default under the Franchise Agreement. f. You pay us a Transfer Fee. g. You and your guarantors and owners must sign a general release and remain liable for pre-Transfer obligations | |
| n. Our right of first refusal to acquire your business | FA: 16.8 | We can match any offer for your Shop or substantially all interests in your entity. |
| o. Our option to purchase your business | FA: 18.4 | We may purchase your Goods related to the Shop at the fair market value (exclusive of good will) and may purchase your Accepted Location if you own it or your interest in any lease. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTIONS (FDD pages 86–91)
What This Means (2024 FDD)
According to Auntie Annes's 2024 Franchise Disclosure Document, if Auntie Annes exercises its option to purchase your business, the assets included in the purchase are your Goods related to the Shop at fair market value (exclusive of goodwill). Additionally, if you own the Accepted Location, Auntie Annes may purchase it, or if you lease the location, they may purchase your interest in the lease.
This means that Auntie Annes has the right to buy tangible items like inventory at a price determined by the market, not including any value associated with the brand's reputation or customer base. The franchisor also has the option to take over the physical location of the Auntie Annes shop, either by buying the property from you or assuming your lease agreement with the landlord.
For a prospective franchisee, this highlights the importance of understanding how the fair market value of goods will be determined at the time of a potential purchase. It also emphasizes the need to carefully consider the terms of your property ownership or lease agreement, as Auntie Annes has the option to step into your position regarding the location. It is important to note that Auntie Annes will not pay for goodwill, which is a common practice in franchise agreements, as the franchisee is benefiting from the brand recognition.