What assets are excluded from the 'Purchased Assets' when Checkers exercises its right to purchase personal property upon termination or expiration of a 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.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, if Checkers exercises its option to purchase the franchisee's personal property upon termination or expiration of the franchise agreement, certain assets are excluded from the 'Purchased Assets'. Specifically, cash, short-term investments, and any items not meeting Checkers' specifications for Restaurants are not included in the assets Checkers may purchase.
This means that a franchisee should not expect to be compensated for these specific assets if Checkers decides to exercise its purchase option. The exclusion of cash and short-term investments is fairly standard, as these are liquid assets. However, the exclusion of items not meeting Checkers' specifications highlights the importance of adhering to the franchisor's standards throughout the term of the agreement.
For a prospective franchisee, this underscores the need to maintain equipment and inventory in accordance with Checkers' requirements. Failure to do so could result in those assets being excluded from any potential purchase by Checkers at the end of the franchise term, potentially leading to a financial loss for the franchisee.