What are the two options Browns Chicken has for determining the purchase price of a Browns Chicken franchise?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
ith 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.
- (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, when the franchise agreement expires without renewal or is terminated by Browns Chicken, the company has the option to purchase the tangible assets of the store. The purchase price for the store, excluding signage which is valued at $100, can be determined in one of two ways, at Browns Chicken's discretion.
Browns Chicken can choose to pay the Book Value of the Purchased Assets. 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. Depreciation is calculated on a straight-line basis from the asset's acquisition date over its Useful Life, without considering salvage value. Alternatively, Browns Chicken can opt to pay the fair market value of the Purchased Assets, as determined by a neutral appraiser.
To determine fair market value, both Browns Chicken and the franchisee will each select an appraiser. These two appraisers will then select a third, neutral appraiser, who will ultimately determine the fair market value. The fees and costs associated with the neutral appraiser are to be shared equally between Browns Chicken and the franchisee. It is important to note that no value will be attributed to the goodwill of the store, the assignment of the lease, or the assignment of any lease for other tangible assets, and Browns Chicken is not required to pay separate consideration for these.