How is the purchase price for the assets determined when Chicken Guy exercises its option to purchase?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
- **B.
Purchase Price.** The purchase price for the Assets ("Purchase Price") shall be their fair market value, (or, for leased assets, the fair market value of Franchisee's lease) determined as of the effective date of purchase in a manner that accounts for reasonable depreciation and condition of the Assets; provided, however, that the Purchase Price shall take into account the termination of this Agreement.
Further, the Purchase Price for the Assets shall not contain any factor or increment for any trademark, service mark or other commercial symbol used in connection with the operation of the Franchised Restaurant nor any goodwill or "going concern" value for the Franchised Restaurant.
Chicken Guy may exclude from the Assets purchased in accordance with this Section any equipment, vehicles, furnishings, fixtures, signs, and inventory that are not approved as meeting then-current standards for a Chicken Guy!
Restaurant or for which Franchisee cannot deliver a Bill of Sale in a form satisfactory to Chicken Guy.
- **C.
Certified Appraisers.** If Chicken Guy and Franchisee are unable to agree on the fair market value of the Assets within 30 days after Franchisee's receipt of Chicken Guy's notice of its intent to exercise its option to purchase the Assets, the fair market value shall be determined by two professionally certified appraisers, Franchisee selecting one and Chicken Guy selecting one.
If the valuations set by the two appraisers differ by more than 10%, the two appraisers shall select a third professionally certified appraiser who also shall appraise the fair market value of the Assets.
The average value set by the appraisers (whether two or three appraisers as the case may be) shall be conclusive and shall be the Purchase Price.
- **D.
Access to Franchised Restaurant.** The appraisers shall be given full access to the Franchised Restaurant, the Franchised Location and Franchisee's books and records during customary business hours to conduct the appraisal and shall value the leasehold improvements, equipment, furnishings, fixtures, signs and inventory in accordance with the standards of this Section 24.
The appraisers' fees and costs shall be borne equally by Chicken Guy and Franchisee.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, the purchase price for the assets will be their fair market value, or for leased assets, the fair market value of the franchisee's lease. This valuation will account for reasonable depreciation and the condition of the assets as of the purchase date. However, the purchase price will not include any value associated with Chicken Guy's trademarks or the goodwill of the restaurant. Chicken Guy can also exclude any assets that don't meet their current standards or for which the franchisee can't provide a satisfactory bill of sale.
If Chicken Guy and the franchisee can't agree on the fair market value within 30 days of the notice of intent to purchase, the value will be determined by two professionally certified appraisers, one chosen by each party. If these two appraisals differ by more than 10%, a third appraiser will be selected by the first two to also appraise the assets. The average of the two or three appraisals will then be considered the conclusive purchase price. The appraisers are to be given full access to the restaurant, location, and financial records to conduct their valuation according to the standards outlined in the agreement. The fees and costs of the appraisers are to be split equally between Chicken Guy and the franchisee.
This process ensures a structured approach to determining the asset's value, involving professional appraisers to mitigate disputes. For a prospective franchisee, this means understanding the criteria used to determine fair market value and the potential for an independent valuation process if an agreement cannot be reached directly with Chicken Guy. Franchisees should also be aware of the costs associated with the appraisal process, as they are responsible for half of these expenses. Furthermore, franchisees should maintain their assets to Chicken Guy's standards to avoid exclusions from the purchase.