Who is responsible for paying sales and other transfer taxes when Browns Chicken purchases assets from a franchisee?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
- (5) The purchase price, as determined above, shall be paid in cash at the closing of the purchase, which shall take place no later than sixty (60) days after the delivery of Brown's notice of its election to purchase the Store, at which time Franchisee shall: (1) deliver instruments transferring good and merchantable title to the assets purchased, free and clear of all liens, encumbrances and liabilities to Brown or its designee, with all sales and other transfer taxes paid by Franchisee; (2) transfer or assign all licenses or permits which may be assigned or transferred; (3) assign to Brown or its designee Franchisee's leasehold interest in the premises of the Store or, if an assignment is prohibited, sublease
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, the franchisee is responsible for paying sales and other transfer taxes when Browns Chicken purchases assets from the franchisee. Specifically, the franchisee must deliver instruments transferring good and merchantable title to the assets purchased, free and clear of all liens, encumbrances, and liabilities to Browns Chicken or its designee, with all sales and other transfer taxes paid by the franchisee.
This means that if a franchisee sells their Browns Chicken location back to the company, they are responsible for covering any applicable sales taxes or transfer taxes associated with the transaction. This is a standard practice in franchise agreements, as the seller (in this case, the franchisee) typically bears the responsibility for these taxes.
Prospective Browns Chicken franchisees should factor these potential tax liabilities into their financial planning, especially when considering a possible future sale of their franchise back to Browns Chicken. Understanding this responsibility is crucial for accurate financial forecasting and ensuring a smooth transfer of assets should the situation arise.