How is the 'Agreed Value' of the Purchased Assets determined for a Checkers franchise?
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).
The "Appraised Asset Value" shall be the amount which an arm's length purchaser would be willing to pay for the Purchased Assets, considering their age and
condition and without reference to their use in a Restaurant. The "Net Book Value" shall be the net book value of the Purchased Assets, as reflected on your books and records, provided all capital assets will be depreciated on a straight line basis over a reasonable period of time not to exceed 5 years, without residual value. The Fair Market Value, the Appraised Asset Value and/or Net Book Value will be determined by a member of a nationally recognized accounting firm (other than a firm which conducts audits of our financial statements) selected by us who has experience in the valuation of restaurant businesses (the "Appraiser"). We (or our assignee) will notify you of the identity of the Appraiser, who will make his determination and submit a written report ("Appraisal Report") to you and us (or our assignee) as soon as practicable, but in no event more than sixty (60) days after his appointment. You agree to promptly provide the Appraiser with such books and records as he or she may require, which you represent and warrant to be complete and accurate. In absence of such books and records or if the Appraiser is not satisfied with their completeness or accuracy, the Appraiser may make the determination of the Agreed Value on the basis of other sources and information he or she deems appropriate. The Appraiser's determination shall be final and binding on the parties hereto.
- (c) We (or our assignee) have the option, exercisable by delivering notice thereof within thirty (30) days after submission of the Appraisal Report (or the date that an agreement is reached, if the parties agree to the Agreed Value), to agree to purchase the Purchased Assets at the Agreed Value.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the 'Agreed Value' of purchased assets is determined through a consultation between Checkers (or its assignee) and the franchisee. If both parties can't agree within 15 days after the Appraisal Notice, the method of determining the Agreed Value depends on whether the agreement expired without renewal or was terminated.
In the event of an expiration without renewal, the Agreed Value is the 'Fair Market Value,' which is what an arm's length purchaser would pay for the assets, assuming they would be used to operate a Checkers restaurant under a current franchise agreement, less any required remodeling costs. However, if the agreement is terminated, the Agreed Value is the lesser of the 'Appraised Asset Value' and the 'Net Book Value.' The Appraised Asset Value is what an arm's length purchaser would pay, considering the age and condition of the assets, without considering their use in a restaurant. The Net Book Value is the net book value of the assets on the franchisee's books, depreciated on a straight-line basis over a period not exceeding 5 years, with no residual value.
A nationally recognized accounting firm (excluding Checkers' auditors) will determine the Fair Market Value, Appraised Asset Value, and Net Book Value. Checkers (or its assignee) will inform the franchisee of the appraiser's identity. The appraiser will then create a written report and submit it to both parties within 60 days of their appointment. The franchisee must provide the appraiser with complete and accurate books and records. If these records are missing or deemed unsatisfactory, the appraiser can use other appropriate sources to determine the Agreed Value. The appraiser's decision is final and binding.
Checkers (or its assignee) has the option to purchase the assets at the Agreed Value by giving notice within 30 days of receiving the Appraisal Report or reaching an agreement. If Checkers exercises this option, 50% of the purchase price will be paid in cash at closing, with the remaining amount paid in installments. The franchisee is responsible for providing clear title to the assets and must comply with bulk sales provisions and tax procedures. Checkers can also offset any amounts owed by the franchisee against the purchase price.