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If Browns Chicken terminates the franchise agreement, does the franchisee have to sell the assets to Browns Chicken?

Browns_Chicken Franchise · 2025 FDD

Answer from 2025 FDD Document

G. Brown's Option to Purchase.

(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

purchase and assignment of leases separate and apart from the remainder of this Agreement.

Source: Item 22 — Contracts (FDD page 43)

What This Means (2025 FDD)

According to Browns Chicken's 2025 Franchise Disclosure Document, if Browns Chicken terminates the franchise agreement, the franchisee is not obligated to sell the assets to Browns Chicken. Instead, Browns Chicken has the option to purchase the tangible assets of the store. This option is exercisable by providing written notice within 60 days of the termination date.

The assets Browns Chicken may choose to purchase include inventory, equipment, fixtures, furniture, signs, cash registers, modems, fax machines, computers, and leasehold improvements. However, the purchase does not include the unamortized portion of the initial franchise fee, cash, goodwill, short-term investments, and accounts receivable. Browns Chicken can also exclude assets it deems unnecessary or not meeting its standards, which will affect the purchase price.

Furthermore, Browns Chicken has the right to an assignment of the franchisee's lease for the premises or a sublease if an assignment is prohibited. Browns Chicken can also assign its option to purchase the assets and lease separately from the rest of the agreement. This clause protects Browns Chicken's interests in maintaining the location and continuing operations, while the franchisee is not forced to sell but may find it a practical option.

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.