Under what circumstances does Checkers have the right to require a determination of the Agreed Value of personal property upon termination or expiration of the franchise agreement?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
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).
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, Checkers has the right to require a determination of the Agreed Value of personal property under specific circumstances related to the termination or expiration of the franchise agreement. Upon termination or expiration (without renewal) of the agreement, Checkers can exercise this right by providing an Appraisal Notice within ten days of the termination or expiration date. This Appraisal Notice initiates the process to determine the Agreed Value of all franchisee-owned personal property used in the franchised restaurant.
The personal property subject to valuation includes inventory of non-perishable products, materials, supplies, furniture, equipment, and signs. However, it excludes cash, short-term investments, and any items not meeting Checkers's specifications for restaurants. After providing the Appraisal Notice, Checkers has the right to assign the option to purchase the assets to a third party. The franchisee is then 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 during business hours to conduct inventories and determine the purchase price.
The Agreed Value is initially determined through consultation between the franchisee and Checkers (or its assignee). 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 without renewal or was terminated. In the event of an expiration without renewal, the Agreed Value is the Fair Market Value, which is the amount an arm's length purchaser would pay for the assets, assuming they would be used for operating a Checkers restaurant under a valid franchise agreement with then-current standard terms, less the cost of any required remodeling. If the agreement was terminated, the Agreed Value is the lesser of the Appraised Asset Value and the Net Book Value.