If Bhc exercises its option to purchase the franchisee's equipment after termination of the Bhc Franchise Agreement, how is the purchase price for proprietary equipment, parts, fixtures, and furnishings determined?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
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, if Bhc chooses to purchase a franchisee's proprietary equipment, parts, fixtures, and furnishings after termination, the purchase price will be the fair market value of those items. In determining the fair market value, both Bhc and the franchisee agree to exclude any consideration for goodwill or the value of the business as an ongoing concern. The purchase price will be paid in cash at the closing of the purchase, which will occur no less than 30 days from the date Bhc exercises its option to purchase.
However, if the franchisee and Bhc cannot agree on the fair market value within a reasonable time, they will jointly designate an independent appraiser to determine the value. The appraiser's decision will be binding on both parties. The franchisee and Bhc will each be responsible for paying 50% of the appraiser's fee.
This process ensures that the franchisee receives a fair price for their assets, while also protecting Bhc from overpaying due to intangible factors like goodwill. The involvement of an independent appraiser provides an objective valuation method if the parties cannot reach an agreement themselves, which is a fairly standard practice in franchise agreements to resolve potential disputes over asset valuation.