At what price will Baya Bar purchase the franchisee's assets if it exercises its option?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
18.2 Right to Purchase.
- 18.2.1 Franchisor shall have the option, to be exercised within thirty (30) days after termination or expiration of this Agreement, to purchase from Franchisee any or all of the furnishings, equipment (including any point of sale system), signs, fixtures, advertising materials, supplies, and inventory of Franchisee related to the operation of the Franchised Business, at Franchisee's cost or fair market value, whichever is less.
Franchisor shall purchase Franchisee's assets free and clear of any liens, charges, encumbrances or security interests and Franchisor shall assume no liabilities whatsoever, unless otherwise agreed to in writing by the parties.
If the parties cannot agree on the fair market value within thirty (30) days of Franchisor's exercise of its option, fair market value shall be determined by two (2) appraisers, with each party selecting one (1) appraiser, and the average of their determinations shall be binding.
In the event of such appraisal, each party shall bear its own legal and other costs and shall split the appraisal fees equally.
If Franchisor elects to exercise its option to purchase herein provided, it shall have the right to set off (i) all fees for any such independent appraiser due from Franchisee, (ii) all amounts due from Franchisee to Franchisor or any of its affiliates and (iii) any costs incurred in connection with any escrow arrangement (including reasonable legal fees), against any payment therefor and shall pay the remaining amount in cash.
Source: Item 22 — CONTRACTS (FDD page 56)
What This Means (2024 FDD)
According to Baya Bar's 2024 Franchise Disclosure Document, if Baya Bar exercises its option to purchase a franchisee's assets upon termination or expiration of the franchise agreement, the purchase price will be the franchisee's cost or the fair market value of the assets, whichever is less. The assets include furnishings, equipment (including any point of sale system), signs, fixtures, advertising materials, supplies, and inventory related to the operation of the franchised business. Baya Bar will purchase these assets free and clear of any liens, charges, encumbrances, or security interests and will assume no liabilities unless otherwise agreed to in writing.
If Baya Bar and the franchisee cannot agree on the fair market value of the assets within 30 days of Baya Bar exercising its purchase option, the fair market value will be determined by two appraisers. Each party will select one appraiser, and the average of their determinations will be binding. Each party will bear its own legal and other costs and split the appraisal fees equally.
Baya Bar has the right to offset certain amounts against the purchase price. These offsets include any fees due from the franchisee for the independent appraiser, all amounts owed by the franchisee to Baya Bar or its affiliates, and any costs incurred in connection with any escrow arrangement, including reasonable legal fees. The remaining amount will be paid in cash.