After the Bhc Franchise Agreement is terminated, how long does Bhc have to exercise its option to purchase the franchisee's inventory and equipment?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
- (d) Within 30 days after termination, expiration or non-renewal of this Agreement, Franchisor will have the option, but not the obligation, to purchase all or any portion of Franchisee's reusable inventory, apparel containing the Marks, proprietary equipment, parts, supplies, fixtures, and furnishings owned and used by Franchisee in Franchisee's franchised operation. Franchisor will be permitted to deduct and withdraw from the purchase price to be paid to Franchisee all sums then due and owing to Franchisor. The purchase price for Franchisee's reusable inventory and apparel containing the Marks will be at Franchisee's cost for said items. The purchase price for the proprietary equipment, parts, fixtures, and furnishings will be the fair market value thereof. In determining the fair market value of such items Franchisee and Franchisor agree to exclude any factor or increment for goodwill or going concern value. The purchase price to be paid to Franchisee will be paid in cash at the closing of any purchase which will occur no less than 30 days from the date Franchisor exercise Franchisor's option unless Franchisee and Franchisor are unable to agree on the fair market value of the assets to be purchased. If Franchisee and Franchisor are unable to reach agreement within a reasonable time as to the fair market value of the items Franchisor has agreed to purchase, Franchisee and Franchisor will jointly designate an independent appraiser, and the appraiser's determination will be binding. Franchisee and Franchisor must each pay 50% of the fee charged by the independent appraiser.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, following the termination, expiration, or non-renewal of the Franchise Agreement, Bhc has the option to purchase the franchisee's assets. This option extends for a period of 30 days after the termination, expiration, or non-renewal date. The assets Bhc may choose to purchase include reusable inventory, apparel bearing Bhc's trademarks, proprietary equipment, parts, supplies, fixtures, and furnishings that the franchisee owns and uses in their franchised operation.
If Bhc decides to exercise its option to purchase these assets, the purchase price for reusable inventory and branded apparel will be based on the franchisee's cost for these items. For proprietary equipment, parts, fixtures, and furnishings, the purchase price will be determined by their fair market value, excluding any consideration for goodwill or the ongoing concern value of the business. Bhc is also entitled to deduct any outstanding amounts owed to them by the franchisee from the total purchase price.
The purchase will be paid in cash, with the closing of the purchase occurring no less than 30 days from the date Bhc exercises its option. However, this timeline is contingent upon both parties agreeing on the fair market value of the assets. If the franchisee and Bhc cannot agree on the fair market value within a reasonable timeframe, they will jointly appoint an independent appraiser whose determination will be binding. The cost of the appraiser will be split equally between the franchisee and Bhc.
This clause ensures that Bhc has the opportunity to reacquire essential assets after a franchise agreement ends, potentially to maintain brand consistency or support a new franchisee taking over the location. For the franchisee, it provides a mechanism to liquidate certain assets, although the exclusion of goodwill in the valuation may result in a lower return than selling the business as an ongoing concern. Franchisees should be prepared for the possibility of an independent appraisal to determine fair market value, and budget accordingly for their share of the appraiser's fee.