Upon expiration or termination of the Burros Fries franchise agreement, will the franchisee be compensated for any goodwill associated with their use of the System or Names and Marks?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee agrees and acknowledges that:
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- As between the parties Franchisor has the right and interest in and to the Names and Marks and the goodwill associated with and symbolized by them;
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- The Names and Marks are valid and serve to identify the System and those who are franchised under the System;
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- Franchisee shall not directly or indirectly contest the validity or the ownership of the Names and Marks;
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- Franchisee's use of the Names and Marks pursuant to this Agreement does not give Franchisee any ownership interest or other interest in or to the Names and Marks, except the non-exclusive Franchise granted herein;
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- Any goodwill arising from Franchisee's use of the Names and Marks in its Business under the System shall inure solely and exclusively to our benefit, and upon expiration or termination of this Agreement and the Franchise herein granted, no monetary amount shall be assigned as attributable to any goodwill associated with Franchisee's use of the System or the Names and Marks;
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2024 FDD)
According to Burros Fries's 2024 Franchise Disclosure Document, a franchisee will not receive any monetary compensation for goodwill associated with their use of the Burros Fries system, names, or marks upon the expiration or termination of the franchise agreement. The agreement explicitly states that any goodwill arising from the franchisee's use of the names and marks in their business under the Burros Fries system will accrue solely to the benefit of the franchisor.
This means that when the franchise agreement ends, the franchisee will not be entitled to any payment for the value or reputation they have built up in the Burros Fries business. This is a standard practice in many franchise systems, as the brand and associated goodwill are considered the property of the franchisor. The franchisee is essentially renting the brand and system for the duration of the agreement.
This provision has significant implications for a prospective Burros Fries franchisee. It underscores that building a successful Burros Fries location primarily benefits the franchisor in the long term, as the goodwill remains with the brand. Franchisees should consider this carefully when evaluating the potential return on investment and the long-term value of their efforts in building the business. They should also factor in the costs associated with ceasing operations and rebranding, as they must effectively distinguish their business from its former Burros Fries identity upon termination or expiration of the agreement.