If Bevaris Alliance exercises its option to purchase a franchisee's business, is the assumption of the franchisee's liabilities included?
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 purchase will not include the assumption of the franchisee's liabilities. Instead, the purchase price will be based on the fair market value of the business, excluding any value for goodwill. This is detailed in Item 17 of the FDD, which outlines the terms related to the transfer of the franchise.
This provision is important for prospective franchisees to understand because it clarifies the financial implications should Bevaris Alliance decide to buy back the franchise. By explicitly stating that liabilities are not assumed, Bevaris Alliance protects itself from inheriting any debts or legal obligations the franchisee may have incurred during their operation of the business. This arrangement could be beneficial for Bevaris Alliance, as it limits their financial exposure during the purchase.
For a franchisee, this means they remain responsible for any outstanding liabilities even after Bevaris Alliance purchases the business. Franchisees should therefore ensure they manage their business operations and finances responsibly to avoid accumulating significant liabilities. This also means that the franchisee will need to settle all outstanding debts and obligations separately from the sale of the franchise to Bevaris Alliance. This is a fairly standard practice in franchising, as franchisors typically want to avoid assuming unknown or potentially large liabilities of individual franchisees.