If the Checkersrallys franchise agreement is terminated, how is the Agreed Value of the Purchased Assets determined?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
- (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.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to the 2025 Checkersrallys Franchise Disclosure Document, the determination of the Agreed Value of Purchased Assets after termination depends on consultation between the franchisee and Checkersrallys (or its assignee). If they cannot agree within 15 days of the Appraisal Notice, the method varies based on whether the agreement expired without renewal or was terminated.
In the event of termination, the Agreed Value will be 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 for the assets, considering their age and condition, without regard to their use in a restaurant. The Net Book Value is the net book value of the assets, depreciated on a straight-line basis over a period not exceeding 5 years, with no residual value. A nationally recognized accounting firm, selected by Checkersrallys, will determine these values.
This valuation will be conducted by an appraiser who is a member of a nationally recognized accounting firm (excluding firms that audit Checkersrallys's financial statements) with experience in valuing restaurant businesses. The appraiser's determination is final and binding. The franchisee is required to provide the appraiser with complete and accurate books and records; otherwise, the appraiser can use other appropriate sources to determine the Agreed Value. This process ensures an objective valuation of the assets in the event of a franchise termination.