Who is responsible for the costs of the appraisers when Cinnaholic exercises its option to purchase the assets?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
22.3. Sale upon Expiration or Termination.
(i) Except in the case of a renewal under Section 2, if this Agreement expires or is terminated or canceled for any reason, Franchisor shall have the option to purchase the Bakery, or a portion of the assets of the Bakery (including fixtures, furniture, equipment and improvements), and which may include at Franchisor's option, all of Franchisee's leasehold interest in and to the real estate upon which the Bakery is located, but not including real property (collectively, the "Assets"), to Franchisor. If Franchisor desires to purchase the Assets but the parties are unable to agree as to a purchase price and terms of such sale, the fair market value of the Assets (to be determined without goodwill or going concern value) shall be determined by three appraisers. Franchisee and Franchisor shall each select one appraiser, and the two appraisers so chosen shall select the third appraiser. The three appraisals shall be averaged to determine the purchase price. Franchisor shall have the right, at any time within 15 days after being advised in writing of the decision of the appraisers as aforesaid, to purchase the Assets at the purchase price as determined above. Each party shall be responsible for the costs and expenses of the appraiser it selected and the cost of the third appraiser shall be shared equally by the parties. Nothing contained in this Section shall be deemed to be a waiver by Franchisor of any default by Franchisee under this Agreement nor shall the exercise of the option to purchase the Assets contained in this Section affect any other rights or remedies granted to Franchisor hereunder or otherwise available to it.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, in the event that Cinnaholic exercises its option to purchase the assets of a bakery upon the expiration or termination of the franchise agreement, and if the parties cannot agree on a purchase price, the fair market value of the assets will be determined by three appraisers.
Both the franchisee and Cinnaholic will each select one appraiser. The two appraisers chosen by each party will then select a third appraiser to complete the panel.
The costs associated with these appraisals are divided. Each party, the franchisee and Cinnaholic, is responsible for covering the expenses of the appraiser they individually selected. The cost of the third appraiser, chosen by the initial two, will be shared equally between the franchisee and Cinnaholic. This cost-sharing arrangement ensures that both parties contribute to the expense of determining the fair market value of the assets.
This arrangement is fairly typical in franchise agreements to ensure fairness in the valuation process when a franchisor exercises its option to purchase a franchise location's assets. It prevents either party from bearing the full financial burden of the appraisal process.