Under what circumstances does Browns Chicken have the option to purchase the assets of a Browns Chicken franchise?
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.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, Browns Chicken has the option to purchase a franchise's assets under specific conditions related to the termination or expiration of the franchise agreement. If the franchise agreement expires without renewal, or if Browns Chicken terminates the agreement according to its provisions, or if the franchisee terminates the agreement without a valid cause, Browns Chicken has the option to purchase the tangible assets of the store.
This option is exercisable by Browns Chicken within 60 days from the date of such expiration or termination. The assets Browns Chicken may purchase include 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 the franchisee. However, this excludes the unamortized portion of the initial franchise fee, cash, goodwill, short-term investments, and accounts receivable.
Browns Chicken also has the option to obtain an assignment of the franchisee's lease for the store premises or a sublease if an assignment is prohibited. Browns Chicken can exclude items that it determines are not reasonably necessary for the store's operation or do not meet its standards, and the purchase price will reflect these exclusions. Browns Chicken retains the right to assign this purchase option to another party.
This clause protects Browns Chicken by allowing them to maintain control over the location and assets of a franchise that is no longer operating under the agreement, ensuring brand consistency and potentially facilitating a smooth transition for a new franchisee or corporate-owned store. For a prospective franchisee, this means that upon termination or expiration of the franchise agreement under the specified conditions, Browns Chicken has the right to buy the store's assets, which could impact the franchisee's exit strategy and potential return on investment.