How is the purchase price for the assets determined if Chicken Guy exercises its option to purchase?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
resulting from or arising out of the premature termination of this Agreement; and (2) Franchisee's payment of such early termination damages is intended to fully compensate Franchisor only for any and all damages related to or arising out of the premature termination of this Agreement, and shall not constitute an election of remedies, waiver of any default under this Agreement, nor waiver of Franchisor's claim for other damages and/or equitable relief arising out of Franchisee's breach of this Agreement.
24. OPTION TO PURCHASE
A. Scope. Upon the expiration or termination of this Agreement for any reason, Chicken Guy shall give written notice to Franchisee, within 30 days after the effective date of termination or expiration, if Chicken Guy intends to exercise its option to purchase from Franchisee some or all of the assets used in the Franchised Restaurant ("Assets"). As used in this Section 24, "Assets" shall mean and include, without limitation, leasehold improvements, equipment, vehicles, furnishings, fixtures, signs and inventory (nonperishable products, materials and supplies) used in the Franchised Restaurant, the real estate fee simple or the lease or sublease for the Franchised Location, and any liquor licenses and any other licenses necessary to operate the Franchised Restaurant. Chicken Guy shall have the unrestricted right to assign this option to purchase the Assets. Chicken Guy or its assignee shall be entitled to all customary representations and warranties that the Assets are free and clear (or, if not, accurate and complete disclosure) as to: (1) ownership, condition and title; (2) liens and encumbrances; (3) environmental and hazardous substances; and (4) validity of contracts and liabilities inuring to Chicken Guy or affecting the Assets, whether contingent or otherwise.
- 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.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to the 2025 Chicken Guy Franchise Disclosure Document, the purchase price for the assets will be the fair market value on the effective purchase date, accounting for reasonable depreciation and the condition of the assets. However, the purchase price will factor in the termination of the franchise agreement and will not include any value for trademarks or goodwill associated with the Chicken Guy restaurant. Chicken Guy has the option to exclude any assets that do not meet the current brand standards or for which the franchisee cannot provide a satisfactory bill of sale.
If Chicken Guy and the franchisee cannot 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 the appraisers' valuations differ by more than 10%, a third appraiser will be selected to determine the fair market value. The average value set by either two or three appraisers will be considered the conclusive purchase price.
Chicken Guy is entitled to customary representations and warranties that the assets are free and clear regarding ownership, condition, title, liens, encumbrances, environmental and hazardous substances, and the validity of contracts. During a 30-day due diligence period after the purchase notice, Chicken Guy can conduct investigations to verify these aspects. The franchisee must provide access to the restaurant and records for appraisals and inspections, ensuring it doesn't unreasonably interfere with operations. The costs for appraisers are to be shared equally between Chicken Guy and the franchisee.