Under what circumstances does Checkers have the option to purchase the franchised restaurant's assets?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
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").
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 under specific conditions related to the termination or expiration of the franchise agreement.
Specifically, upon the termination or expiration (without renewal) of the Franchise Agreement, Checkers has the right to exercise an option to purchase the franchisee's personal property used in the restaurant. This right is enacted by providing an Appraisal Notice within ten days of the termination or expiration date. The assets subject to purchase include inventory of non-perishable products, materials, supplies, furniture, equipment, and signs owned by the franchisee, but exclude cash, short-term investments, and items not meeting Checkers' specifications. Checkers also has the right to assign this purchase option to a third party franchisee.
Following the Appraisal Notice, the franchisee is restricted from selling or removing any personal property from the premises and must provide Checkers (or its assignee) and the designated appraiser full access to the restaurant and all relevant books and records to conduct inventories and determine the purchase price. Checkers has 30 days after submission of the Appraisal Report (or the date that an agreement is reached) to exercise their option to purchase the assets at the agreed value. If Checkers exercises its option to purchase, 50% of the purchase price will be paid in cash at the closing, which will occur no later than 60 days after the exercise of the purchase option.