How is the 'Agreed Value' determined in the event of a termination of the Checkers Franchise Agreement?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
- (a) Upon termination or expiration (without renewal) of this Agreement, we have the right, exercisable by giving notice thereof ("Appraisal Notice") within ten (10) days after the date of such termination or expiration, to require that a determination be made of the "Agreed Value" (as defined below) of all the personal property used in the Franchised Restaurant which you own, including inventory of non-perishable products, materials, supplies, furniture, equipment, signs, but excluding any cash and short-term investments and any items not meeting our specifications for Restaurants (the "Purchased Assets"). At any time following our providing you an Appraisal Notice, we shall have the unrestricted right to assign this option to purchase separate and apart from the remainder of this Agreement, including, without limitation, to another third-party franchisee. Upon such notice, you may not sell or remove any of the personal property of the Franchised Restaurant from the Premises and must give us (or our assignee), our (or our assignee's) designated agents and the "Appraiser" (as defined below) full access to the Franchised Restaurant and all of your books and records at any time during customary business hours in order to conduct inventories and determine the purchase price for the Purchased Assets.
- (b) The Agreed Value shall be determined by consultation between you and us (or our assignee). If you and we (or our assignee) are unable to agree on the Agreed Value of the Purchased Assets within fifteen (15) days after the Appraisal Notice, then the Agreed Value will be as follows: (a) in the event of an expiration (without renewal) of this Agreement, the Agreed Value shall be the "Fair Market Value," consisting of the amount which an arm's length purchaser would be willing to pay for the Purchased Assets, assuming that the Purchased Assets would be used for the operation of a Restaurant under a valid franchise agreement reflecting the thencurrent (or if we are not offering franchises at that time, then the most recent) standard terms upon which we offer franchises for Restaurants, less the cost of any required remodeling; and (b) in the event of any termination of this Agreement, the Agreed Value shall be the lesser of the Appraised Asset Value (as defined below) and the Net Book Value (as defined below).
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, the determination of the 'Agreed Value' for personal property in a terminated franchise restaurant depends on consultation between the franchisee and Checkers. This includes all the personal property used in the Franchised Restaurant which you own, including inventory of non-perishable products, materials, supplies, furniture, equipment, signs, but excluding any cash and short-term investments and any items not meeting Checkers' specifications for Restaurants
If the franchisee and Checkers cannot agree on the 'Agreed Value' within 15 days after the Appraisal Notice, a different method applies depending on whether the agreement was terminated or expired without renewal. In the event of termination, the 'Agreed Value' will be the lesser of the 'Appraised Asset Value' and the 'Net Book Value'. The FDD does not define 'Appraised Asset Value' or 'Net Book Value'.
This valuation process is important for a prospective Checkers franchisee to understand, as it dictates the financial terms under which Checkers may repurchase the restaurant's assets upon termination of the franchise agreement. The franchisee should seek clarification from Checkers regarding the definitions of 'Appraised Asset Value' and 'Net Book Value' to fully understand how the value of their assets will be determined in the event of termination. Understanding these terms can help a franchisee anticipate potential financial outcomes and negotiate more effectively during the valuation process.