How is 'Appraised Value' determined for Acquired Assets in the Chop5 Salad Kitchen Franchise Agreement?
Chop5_Salad_Kitchen Franchise · 2024 FDDAnswer from 2024 FDD Document
- "Appraised Value" means the fair market value of the Acquired Assets as determined by independent appraisers in accordance with §21.2.
21.2. Right to Purchase Facility and Assets.
- (a) Generally.
Upon the termination or expiration of this Agreement we have the option to purchase your Restaurant and/or its assets at fair market value.
If we exercise this option, fair market value shall be determined as of the effective date of the termination or expiration of this Agreement.
We will notify you of the specific items we wish to purchase (the "Acquired Assets").
- (b) Selecting Qualified Appraisers.
Each party shall appoint an appraiser with experience appraising businesses comparable to a Restaurant in the United States.
This appointment of the appraisers shall be made within 30 days after the termination or expiration of this Agreement by giving written notice to the other party of the name and address of the appraiser.
If either party fails to appoint an appraiser within the 30-day period, the appraisal shall be made by the sole appraiser appointed within that period.
If each party appoints an appraiser within the 30-day period, then within 30 days after that, the two (2) appraisers shall appoint a third (3rd) appraiser.
If the two (2) appraisers fail to agree on the third (3rd) appraiser within the 30-day period, then a third (3rd) appraiser shall be appointed by the American Arbitration Association, acting through its office located closest to our corporate headquarters, as promptly as possible after that, upon application by either party.
Nothing in this provision shall prohibit the parties from jointly approving a single appraiser.
If for any reason there shall be only a single appraiser, then the Appraised Value shall be the value determined by the single appraiser.
You and we shall equally bear the cost of the appraisal.
- (e) Closing.
Once the Appraised Value has been determined, we have 60 additional days to prepare for the closing.
The purchase price will be paid as follows: (i) 20% is due at the time of closing; and (ii) the remaining balance will be paid in 60 equal monthly installments of principal plus interest at a rate of interest per annum equal to the prime lending rate charged by Branch Banking & Trust of Winston-Salem North Carolina (or such other bank we designate in the future) determined as of the closing date, with annual adjustments based on the prime rate charged on each anniversary date.
We may deduct from the Appraised Value all amounts you owe us or our affiliates under this Agreement or any other Definitive Agreement, including any damages owed as a result of our termination of this Agreement due to your breach (including liquidated damages, if applicable).
Source: Item 23 — RECEIPT (FDD pages 50–178)
What This Means (2024 FDD)
According to Chop5 Salad Kitchen's 2024 Franchise Disclosure Document, the 'Appraised Value' of acquired assets is determined by independent appraisers to reflect the fair market value. If Chop5 Salad Kitchen exercises its option to purchase a restaurant and/or its assets upon termination or expiration of the franchise agreement, the fair market value will be determined as of the effective date of termination or expiration. Chop5 Salad Kitchen will notify the franchisee of the specific items they wish to purchase, referred to as the 'Acquired Assets'.
To determine the appraised value, each party (Chop5 Salad Kitchen and the franchisee) will appoint an appraiser with experience appraising businesses comparable to a Chop5 Salad Kitchen restaurant within 30 days of the agreement's termination or expiration. If a party fails to appoint an appraiser within this period, the appraisal will be conducted by the sole appraiser appointed. If both parties appoint appraisers, these two appraisers have 30 days to appoint a third appraiser. Should they fail to agree on a third appraiser within that time, the American Arbitration Association will appoint one.
If only a single appraiser is involved for any reason, the appraised value will be determined by that appraiser. The costs of the appraisal are to be shared equally between Chop5 Salad Kitchen and the franchisee. Once the appraised value is determined, Chop5 Salad Kitchen has 60 days to prepare for the closing. At closing, 20% of the purchase price is due, with the remaining balance paid in 60 equal monthly installments, including interest based on the prime lending rate of Branch Banking & Trust of Winston-Salem, North Carolina, or another designated bank. Chop5 Salad Kitchen may deduct any amounts owed to them or their affiliates from the appraised value, including damages resulting from the franchisee's breach of the agreement.