factual

Can Browns Chicken exclude assets from the purchase if they don't meet Browns Chicken's standards?

Browns_Chicken Franchise · 2025 FDD

Answer from 2025 FDD Document

(1) If this Agreement expires (without renewal) or is terminated by Brown in accordance with its provisions or by Franchisee without cause, then Brown shall have the option, exercisable by giving written notice thereof within sixty (60) days from the date of such expiration or termination, to purchase from Franchisee any or all the tangible assets (including, without limitation, inventory of saleable products, equipment, fixtures, furniture, signs, cash registers, modems, fax machines, computers, leasehold improvements and any other assets of the Store owned by Franchisee, but excluding any unamortized portion of the initial franchise fee, cash, goodwill, short-term investments and accounts receivable) of the Store (collectively, the "Purchased Assets") and to an assignment of Franchisee's lease for (a) the premises of the Store (or, if an assignment is prohibited, a sublease for the full remaining term and on the same terms and conditions as Franchisee's lease) and (b) any other tangible assets used in connection with the Store. Brown may exclude from the assets purchased any items that Brown determines 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

Source: Item 22 — Contracts (FDD page 43)

What This Means (2025 FDD)

According to Browns Chicken's 2025 Franchise Disclosure Document, Browns Chicken has the option to purchase tangible assets from a franchisee if the franchise agreement expires, is terminated by Browns Chicken, or is terminated by the franchisee without cause. Browns Chicken can exclude assets from this purchase if they determine the items are not reasonably necessary for the store's operation, do not function properly, are of unacceptable quality, or have not been approved as meeting Browns Chicken's standards for its stores. The purchase price will be adjusted to reflect these exclusions.

This clause protects Browns Chicken by ensuring that they are not obligated to buy substandard or unnecessary equipment when a franchise agreement ends. It allows Browns Chicken to maintain brand standards and operational efficiency across all its locations.

For a prospective franchisee, this means that maintaining equipment and inventory according to Browns Chicken's standards is crucial. If a franchisee neglects these standards, Browns Chicken can refuse to purchase those assets at the end of the agreement, potentially resulting in a financial loss for the franchisee. This provision encourages franchisees to adhere to Browns Chicken's operational guidelines and invest in approved equipment and supplies.

Disclaimer: This information is extracted from the 2025 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.