How is 'Book Value' defined when Browns Chicken purchases the store?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
are not reasonably necessary (in function or quality) to the Store's operation or that Brown has not approved as meeting its standards for BROWN's Stores, and the purchase price will reflect these exclusions.Brown shall have the unrestricted right to assign this option to
purchase and assignment of leases separate and apart from the remainder of this Agreement.
- (2) The purchase price for the Store (except for the signage, the purchase price of which is $100) shall be either, at Brown's option: (a) the Book Value (as defined below) of the Purchased Assets, or (b) the fair market value of the Purchased Assets, as determined by a neutral appraiser. Both Brown and the Franchisee shall select an appraiser, whose sole function would be to select a third, neutral appraiser, who would determine the fair market value of the Purchased Assets. The fees and costs of the neutral appraiser shall be shared equally by Brown and Franchisee. "Book Value" shall mean the net book value of the Purchased Assets, as disclosed by the balance sheet of the last monthly statement of the Store required to have been submitted to Brown pursuant to Paragraph 12.B. hereof prior to such termination or expiration, provided, however, that: (1) each depreciable asset shall be valued as if it had been depreciated on a "straight-line" basis from the date of its acquisition over its Useful Life (defined below) without provision for salvage value; and (2) Brown may exclude from the Purchased Assets any inventory, equipment, fixtures, furniture, signs, cash registers, modems, fax machines, computers, or leasehold improvements of the Store that have not been acquired in compliance with this Agreement. No value shall be attributed to goodwill of the Store, the assignment of lease (or sublease) for the premises of the Store, or the assignment of any lease for any other tangible assets used in connection with the Store, and Brown shall not be required to pay any separate consideration for any such assignment or sublease.
- (3) For purposes of this Paragraph 21.G., "Useful Life" shall be as follows:
Furniture, fixtures, signs: 7 years
Equipment (including electronic equipment): 5 years
Leasehold improvements: 10 years
- (4) If Franchisee has not furnished Brown a balance sheet of the last monthly statement of the Store, Brown may estab
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, when Browns Chicken purchases a store, the purchase price for the store (excluding signage, which is valued at $100) will be, at Browns Chicken's option, either the Book Value of the Purchased Assets or the fair market value as determined by a neutral appraiser. The franchisee and Browns Chicken will each select an appraiser, who will then select a third, neutral appraiser to determine the fair market value. The fees and costs of the neutral appraiser will be shared equally by Browns Chicken and the franchisee.
'Book Value' is defined as the net book value of the Purchased Assets, as disclosed by the balance sheet of the last monthly statement of the store that was required to be submitted to Browns Chicken before the termination or expiration of the franchise agreement. However, each depreciable asset will be valued as if it had been depreciated on a straight-line basis from the date of its acquisition over its Useful Life, without considering any salvage value. Browns Chicken may exclude any inventory, equipment, fixtures, furniture, signs, cash registers, modems, fax machines, computers, or leasehold improvements that were not acquired in compliance with the Franchise Agreement.
No value will be attributed to the goodwill of the store, the assignment of the lease for the premises, or the assignment of any lease for other tangible assets used in connection with the store. Browns Chicken will not be required to pay any separate consideration for such assignments or subleases. For the purpose of determining 'Useful Life', furniture, fixtures, and signs are depreciated over 7 years; equipment (including electronic equipment) is depreciated over 5 years; and leasehold improvements are depreciated over 10 years.
If the franchisee has not provided Browns Chicken with a balance sheet of the last monthly statement of the store, Browns Chicken may establish the Book Value of the Purchased Assets based on the franchisee's initial cost, depreciated on a straight-line basis as described above. If evidence of the franchisee's initial cost for any Purchased Asset is not proven by actual receipts, Browns Chicken will assign an initial cost based on its best information for like items being sold at the time the franchisee opened their store. This valuation method is important for prospective franchisees to understand, as it directly impacts the financial terms if Browns Chicken decides to repurchase the store.