If Browns Chicken chooses fair market value, who determines it?
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 ac
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, if Browns Chicken elects to purchase the store's assets based on fair market value, a neutral appraiser will determine that value. The process involves both Browns Chicken and the franchisee each selecting an appraiser. These two appraisers then choose a third, neutral appraiser. This neutral appraiser is responsible for determining the fair market value of the purchased assets.
The fees and costs associated with the neutral appraiser are to be shared equally between Browns Chicken and the franchisee. This arrangement ensures that neither party bears the full financial burden of the appraisal process. The "Purchased Assets" include the store itself, excluding signage which has a fixed price of $100.
This appraisal process is important for a prospective franchisee to understand, as it dictates how the value of their business is assessed should Browns Chicken decide to purchase it. The franchisee should ensure they understand the selection process for the appraisers and the criteria used to determine fair market value to protect their interests during any potential buy-out scenario.