If Bevaris Alliance exercises its option to purchase a Bevaris Alliance business, is goodwill included in the valuation?
Bevaris_Alliance Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in Franchise Agreement | Summary |
|---|---|---|
| which must be approved by us. | ||
| l. Bevaris approval of transfer | Section | We have the right to approve all transfers, which shall be |
| by franchisee | 16.11 | subject to the provisions of the Franchise Agreement. |
| m. Conditions for Bevaris approval of transfer | Section 16.11 | Transferee approved by us, transfer fee paid, transferee not competitor, your account is current, you sign a release, transferee signs all documents, lender consents, and subordination agreements. |
| n. Bevaris’ right of first refusal to acquire franchisee’s business | Section 16.3 | Bevaris can match any offer for the purchase of Your franchise at Bevaris’ option. |
| o. Bevaris’ option to purchase Your business | Section 16.7 | Upon transfer, fair market value (but no value for goodwill), legal compliance, no assumption of your liabilities. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 17–18)
What This Means (2024 FDD)
According to Bevaris Alliance's 2024 Franchise Disclosure Document, if Bevaris Alliance exercises its option to purchase a franchisee's business, the valuation of the business will be based on fair market value. However, the valuation will specifically exclude any value for goodwill. This is detailed in Item 17, which outlines the terms for renewal, termination, transfer, and dispute resolution.
For a prospective franchisee, this means that if Bevaris Alliance decides to buy back the franchise, the franchisee will not be compensated for the brand reputation, customer relationships, or other intangible assets that contribute to the business's overall value. The purchase price will only reflect the fair market value of the tangible assets and the business's operational performance, without considering the potential premium associated with goodwill.
This aspect of the franchise agreement is crucial for franchisees to understand, as it can significantly impact the financial outcome if Bevaris Alliance chooses to exercise its purchase option. Franchisees should consider this when projecting potential returns on investment and assessing the overall risks and benefits of investing in a Bevaris Alliance franchise. It is also important to note that the agreement specifies that Bevaris Alliance will not assume any of the franchisee's liabilities upon purchasing the business, further protecting the franchisor's interests in such a transaction.