If Aw purchases the franchisee's assets after termination, is the independent appraiser's determination of fair market value binding?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
- 16.7 Purchase of Assets. Upon termination or expiration of this Agreement, we shall have the right (but not the duty), to be exercised by notice of intent to do so within thirty (30) days after termination or expiration, to purchase for cash any or all fixtures, furniture, equipment, inventory, products, supplies, signs, and all items bearing the Marks, at your cost or fair market value, whichever is less. If the parties cannot agree on fair market value within a reasonable time, an independent appraiser acceptable to you shall be designated by us, and the designated appraiser's determination shall be binding. If we elect to exercise any option to purchase herein provided we shall have the right to set off all amounts due from you under this Agreement, and the cost of the appraisal, if any, against any payment therefore.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, if Aw exercises its right to purchase a franchisee's assets upon termination or expiration of the franchise agreement, the price will be the franchisee's cost or the fair market value, whichever is less. If the franchisee and Aw cannot agree on the fair market value, Aw will designate an independent appraiser acceptable to the franchisee. The determination of value made by this independent appraiser will be binding on both parties.
This means that a franchisee may be required to sell their assets to Aw at a price determined by an appraiser, limiting their ability to negotiate a higher price. The franchisee does have some protection in that they must find the appraiser acceptable.
Aw also has the right to offset any amounts owed by the franchisee under the Franchise Agreement, as well as the cost of the appraisal, against any payment for the assets. This could significantly reduce the amount the franchisee receives for their assets upon termination.