When must Checkersrallys provide notice to exercise its right to purchase personal property upon termination or expiration of the franchise agreement?
Checkersrallys 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 Checkersrallys's 2025 Franchise Disclosure Document, upon termination or expiration of the franchise agreement, Checkersrallys has the right to purchase the franchisee's personal property used in the restaurant. To exercise this right, Checkersrallys must provide an "Appraisal Notice" within ten days after the date of such termination or expiration. This notice initiates the process of determining the "Agreed Value" of the personal property, which includes items like inventory, furniture, equipment, and signs, but excludes cash, short-term investments, and items not meeting Checkersrallys's specifications.
Following the Appraisal Notice, the franchisee is restricted from selling or removing any personal property from the premises and must allow Checkersrallys (or its assignee) access to the restaurant and records for inventories and price determination. The "Agreed Value" is initially determined through consultation between the franchisee and Checkersrallys. If an agreement cannot be reached within fifteen days after the Appraisal Notice, the method for determining the value depends on whether the agreement expired without renewal or was terminated.
In the case of expiration without renewal, the Agreed Value is the "Fair Market Value," which is what an arm's length purchaser would pay for the assets, assuming they would be used for a Checkersrallys restaurant under a valid franchise agreement with current terms, less any required remodeling costs. If the agreement was terminated, the Agreed Value is the lesser of the Appraised Asset Value and the Net Book Value.
This clause ensures that Checkersrallys has the option to maintain consistency and operational standards across its franchise network by acquiring the assets of a departing franchisee. For a prospective franchisee, this means understanding the valuation methods and potential financial implications upon termination or expiration of the franchise agreement, as they may be required to sell their restaurant's assets back to Checkersrallys.