How is the purchase price for the assets determined when Carls Jr. exercises its option?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
liates to construct or equip a foodservice outlet substantially similar to a Carl's Jr. Restaurant.
23. OPTION TO PURCHASE
- A. Upon the expiration or termination of this Agreement for any reason, CJR will have the option to purchase from Franchisee some or all of the assets used in the Franchised Restaurant ("Assets"). CJR may exercise its option by giving written notice to Franchisee at any time following expiration or termination up until 60 days after the later of: (1) the effective date of termination or expiration; or (2) the date Franchisee ceases to operate the Franchised Restaurant. As used in this Section 23, "Assets" shall mean and include, without limitation, leasehold improvements, equipment, vehicles, furnishings, fixtures, signs and inventory (non-perishable products, materials and supplies) used in the Franchised Restaurant, and the real estate fee simple or the lease or sublease for the Franchised Location. CJR shall be entitled to the entry of interlocutory and permanent orders of specific performance by a court of competent jurisdiction if Franchisee fails or refuses to timely meet its obligations under this Section 23.
- B. CJR shall have the unrestricted right to assign this option to purchase the Assets. CJR or its assignee shall be entitled to all customary representations and warranties that the Assets are free and clear (or, if not, accurate and complete disclosure) as to: (1) ownership, condition and title; (2) liens and encumbrances; (3) environmental and hazardous substances; and (4) validity of contracts and liabilities inuring to CJR or affecting the Assets, whether contingent or otherwise.
- C. The purchase price for the Assets ("Purchase Price") shall be their fair market value, (or, for leased assets, the fair market value of Franchisee's lease) determined as of the effective date of purchase in a manner that accounts for reasonable depreciation and condition of the Assets; provided, however, that the Purchase Price shall take into account the termination of this Agreement. Further, the Purchase Price for the Assets shall not contain any factor or increment for any trademark, service mark or other commercial
symbol used in connection with the operation of the Franchised Restaurant nor any goodwill or "going concern" value for the Franchised Restaurant. CJR may exclude from the Assets purchased in accordance with this Section any equipment, vehicles, furnishings, fixtures, signs, and inventory that are not approved as meeting then-current standards for a Carl's Jr. Restaurant or for which Franchisee cannot deliver a Bill of Sale in a form satisfactory to CJR.
Source: Item 22 — CONTRACTS (FDD pages 75–76)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, the purchase price for the assets is determined by their fair market value as of the purchase date, accounting for reasonable depreciation and the condition of the assets. However, the price does not include any value associated with the Carls Jr. trademark or goodwill.
If Carls Jr. and the franchisee cannot agree on the fair market value within 30 days of Carls Jr.'s notice to exercise its purchase option, the value will be determined by two professionally certified appraisers. The franchisee and Carls Jr. each select one appraiser within 60 days of the notice. If the higher appraisal is more than 10% greater than the lower one, a third appraiser is selected by the first two, and the average of the two or three appraisals will be the purchase price. Both Carls Jr. and the franchisee are equally responsible for covering the costs of the appraisers.
Carls Jr. has the right to inspect the franchisee's restaurant and records to allow the appraisers to value the leasehold improvements, equipment, furnishings, fixtures, signs, and inventory. Within 10 days after the purchase price is determined, Carls Jr. can exercise its option to purchase by notifying the franchisee in writing. The purchase price will be paid in cash or cash equivalents no later than 60 days after Carls Jr.'s purchase notice. Carls Jr. also has the right to offset the purchase price by any amounts the franchisee owes to Carls Jr. or any encumbrances or liens against the assets.