What right does Burros Fries have regarding the purchase of a franchisee's interest in the franchised business?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
In the event of any such Loss, we, at our option, may: (a) if the Loss has not materially impaired the Business (in our reasonable Business Judgment), require that the Franchisee, upon our demand, place the Business in good condition and repair reasonably satisfactory to us as mentioned above; or (b) if the Loss has materially impaired the Business and it is substantially destroyed, (in our sole judgment), we may require the Franchisee to repair the existing Business or find an alternative location within the Territory within ninety (90) days or soonest possible timeframe according to Franchisee's lease. We may extend this period an additional thirty (30) days at our discretion and failure of Franchisee to comply may result in termination of this Agreement. Upon termination, the Franchisee must return to us the System (including
all materials), and we have the first right of refusal to purchase all Assets (as described in Section 24.G), but any such purchase price will be reduced to account for the Loss the Franchisee incurred.
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2024 FDD)
According to the 2024 Burros Fries Franchise Disclosure Document, Burros Fries has specific rights regarding the purchase of a franchisee's interest in the franchised business. Specifically, Burros Fries has the first right of refusal to purchase all assets of the business if the franchise agreement is terminated due to a loss that has materially impaired the business. This loss could be from damage, theft, or destruction of the business, or requisition by a governmental entity.
However, the purchase price in such a scenario will be reduced to account for the loss the franchisee incurred. This means that while Burros Fries has the option to buy the business back, the franchisee will not receive the full market value due to the damages or loss sustained. The franchisee is obligated to inform Burros Fries in writing within ten days of any such loss.
This clause protects Burros Fries by allowing them to maintain control over the location and prevent a competitor from acquiring a distressed Burros Fries location. For a prospective franchisee, this means that in the event of a significant loss to the business, Burros Fries has the option to repurchase the assets, potentially at a reduced price, rather than allowing the franchisee to sell to another party freely.