What is the purchase price for the signage when Browns Chicken exercises its option to purchase a Browns Chicken franchise?
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 the 2025 Browns Chicken Franchise Disclosure Document, when Browns Chicken exercises its option to purchase a franchise, the purchase price for the signage is specifically set at $100. This is a fixed cost for the signage, regardless of other valuation methods used for the rest of the store's assets.
Browns Chicken determines the purchase price for the store's tangible assets, excluding the signage, through one of two methods at their discretion: either the Book Value of the Purchased Assets or the fair market value as determined by a neutral appraiser. If an appraiser is used, both Browns Chicken and the franchisee will select an appraiser who then selects a third, neutral appraiser to determine the fair market value. The costs for the neutral appraiser are split equally between Browns Chicken and the franchisee.
Book Value is defined as the net book value of the Purchased Assets, based on the store's last monthly statement submitted to Browns Chicken before the termination or expiration of the agreement. Depreciable assets are valued using a straight-line depreciation method from the date of acquisition over their Useful Life, without considering salvage value. Browns Chicken can exclude assets not acquired in compliance with the agreement. No value is attributed to goodwill, lease assignments, or subleases, and Browns Chicken is not required to pay separate consideration for these items.
This fixed price for signage could be advantageous for a franchisee if the fair market value of the signage is higher than $100, as Browns Chicken cannot charge more than this amount. Conversely, if the signage is older or of lower value, Browns Chicken still only pays $100. This clause provides clarity and a defined cost for this specific asset during the purchase option.