What options does Checkers have regarding purchasing the franchised restaurant upon termination or expiration of the agreement?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
by any of the foregoing covenants, and we obtain enforcement in a judicial or arbitration proceeding, the obligations under the breached covenant will be tolled during the period(s) of time that the covenant is breached and/or we seek to enforce it, and will continue in effect for a period of time ending two (2) years after the date of the order enforcing the covenant.
16.04 Option to Purchase Franchised Restaurant.
- (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, Checkers has the option to purchase the franchised restaurant's assets upon termination or expiration of the franchise agreement. Checkers can exercise this right by providing an Appraisal Notice within ten days of termination or expiration. This option can be assigned to another third-party franchisee. After the notice, the franchisee cannot sell or remove any personal property from the premises and must allow Checkers (or its assignee) access to the restaurant and records to determine the purchase price.
The purchase will include all personal property used in the restaurant that the franchisee owns, such as inventory, materials, supplies, furniture, equipment, and signs, but excludes cash, short-term investments, and items not meeting Checkers' specifications. The price, referred to as the "Agreed Value," will be determined through consultation between Checkers (or its assignee) and the franchisee.
If an agreement cannot be reached within fifteen days after the Appraisal Notice, the method for determining the Agreed Value depends on whether the agreement expired or was terminated. In the event of expiration without renewal, the Agreed Value will be 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. In the event of termination, the Agreed Value will be the lesser of the Appraised Asset Value and the Net Book Value. Checkers (or its assignee) has thirty days after submission of the Appraisal Report (or the date that an agreement is reached) to decide whether to purchase the assets at the Agreed Value. Fifty percent of the purchase price will be paid in cash at closing, with the remaining twenty-five percent paid later with interest at the Prime Rate.