Does the purchase price Browns Chicken pays for a Browns Chicken franchise reflect any excluded assets?
Browns_Chicken Franchise · 2025 FDDAnswer 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.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, when Browns Chicken exercises its option to purchase a franchise, the purchase price calculation specifically excludes certain assets. Browns Chicken has the option to purchase tangible assets of the store, but may exclude items that are not reasonably necessary for the store's operation or do not meet Browns Chicken's standards.
The purchase price will not include the unamortized portion of the initial franchise fee, cash, goodwill, short-term investments, and accounts receivable. This means a franchisee will not be compensated for these items when Browns Chicken buys back the store. The exclusion of goodwill is a standard practice, as goodwill is often tied to the brand itself rather than the individual franchisee's efforts.
For a prospective Browns Chicken franchisee, this means that if Browns Chicken decides to repurchase the franchise, the franchisee will only be compensated for tangible assets like equipment, fixtures, and inventory, and not for intangible assets like the store's reputation or customer base. The franchisee should be aware of this when considering the potential resale value of their franchise.