Does Canopy Lawn Care have a right of first refusal to purchase the franchisee's business?
Canopy_Lawn_Care Franchise · 2025 FDDAnswer from 2025 FDD Document
16. OPTION TO PURCHASE RIGHT OF FIRST REFUSAL
- 16.1 Unless otherwise explicitly provided by this Agreement, Franchisor shall be entitled to exercise the rights provided in this Section immediately upon:
- (a) The expiration without the extension of Franchisee's rights to operate the Lawn Care Business or the termination for any reason of the License or this Agreement; or
- (b) The receipt by Franchisor of a copy of a Purchase Offer.
- (a) The expiration without the extension of Franchisee's rights to operate the Lawn Care Business or the termination for any reason of the License or this Agreement; or
- 16.2 Upon any event described in this Section 16.2, Franchisor shall have the option to purchase all of Franchisee's rights, title and interest in the Business, and all its improvements, furniture, fixtures, equipment and products, and all of Franchisee's accounts, contract rights, customer and vendor lists, work in progress and other business assets.
- 16.3 The purchase price for assets itemized in Section 16.2 will be, subject to Section 16.4: (i) the current fair market value if Section 16.1(a) is applicable; or (ii) the price specified in the Purchase Offer received by Franchisee if Section 16.1(b) is applicable. If Franchisee and Franchisor cannot agree on fair market value within a reasonable time, an independent appraiser will be designated by each of Franchisee and Franchisor and an average of the 2 appraised values will be binding. Appraised values will exclude any and all consideration for goodwill or going concern value created by the Marks and business system licensed to Franchisee.
- 16.4 If Franchisor elects to exercise any option to purchase provided in this Section 16 Franchisor will have the right to set off all amounts due from Franchisee under this Agreement or any other agreements between the parties, any commissions or fees payable to any broker, agent or other intermediary and the cost of the appraisal, if any, against any payment. Franchisee shall also have the right to substitute cash for any other form of consideration specified in the Purchase Offer and to pay in full the entire purchase price at the time of closing.
Source: Item 22 — CONTRACTS (FDD page 55)
What This Means (2025 FDD)
According to the 2025 FDD, Canopy Lawn Care does have the option to purchase the franchisee's business under certain conditions. Specifically, Canopy Lawn Care can exercise this right upon the expiration or termination of the franchise agreement, or if the franchisee receives a purchase offer from a third party.
If Canopy Lawn Care exercises its option to purchase the franchise, the purchase price will be determined based on the current fair market value of the business assets if the option is exercised due to expiration or termination of the agreement. If the option is triggered by a third-party purchase offer, the purchase price will be the price specified in that offer. In cases where Canopy Lawn Care and the franchisee cannot agree on the fair market value, independent appraisers will be designated by each party, and the average of the two appraised values will be binding. However, the appraised value will not include any consideration for goodwill or the value created by the Canopy Lawn Care marks and business system.
Canopy Lawn Care also has the right to offset any amounts due from the franchisee, including fees, commissions, or appraisal costs, against the purchase price. The franchisee has the right to substitute cash for any other form of consideration specified in the purchase offer and pay the entire purchase price at closing. This arrangement gives Canopy Lawn Care significant control over the transfer of ownership and ensures that the brand maintains consistency and quality, while also providing a mechanism for the franchisee to exit the business under specified conditions.