Who bears the fees and costs of the appraisers when Carls Jr. exercises its option to purchase the assets?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
- E. The appraisers shall be given full access to the Franchised Restaurant, the Franchised Location and Franchisee's books and records during customary business hours to conduct the appraisal and shall value the leasehold improvements, equipment, furnishings, fixtures, signs and inventory in accordance with the standards of this Section 23.
The appraisers' fees and costs shall be borne equally by CJR and Franchisee.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, when Carls Jr. exercises its option to purchase a franchisee's assets and an agreement on fair market value cannot be reached within 30 days, the determination of the asset's value will be made by two certified appraisers. One appraiser is selected by the franchisee, and the other is selected by Carls Jr. If the initial appraisals differ by more than 10%, a third appraiser is selected by the first two, and the average of all appraisals determines the purchase price.
The fees and costs associated with these appraisers are to be shared equally between Carls Jr. and the franchisee. This arrangement ensures that neither party bears the full financial burden of the appraisal process, which is intended to establish a fair market value for the assets being purchased.
This clause in the franchise agreement protects the franchisee from having to shoulder the entire cost of determining the fair market value of their assets should Carls Jr. decide to purchase them upon termination or expiration of the franchise agreement. It also prevents Carls Jr. from unilaterally imposing appraisal costs on the franchisee. Sharing the expense encourages both parties to select appraisers carefully and to negotiate in good faith to avoid the need for a third appraiser, which would increase the overall cost.