How long does City Wide have to exercise its option to purchase the interest being offered by a City Wide franchisee?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
- 20.1 Upon termination or expiration of this Agreement, CITY WIDE will have an option, but not an obligation, to purchase from Franchisee all or any assets of the Franchised Business, including, without limitation all supplies, equipment, advertising materials, and other indicia bearing CITY WIDE's Marks, at fair market value. CITY WIDE may exercise this option ("Option to Purchase") by giving Franchisee written notice within sixty (60) calendar days after such termination. If the parties cannot agree on fair market value within a reasonable time, an independent appraiser acceptable to Franchisee will be designated by CITY WIDE, whose determination will be binding. If CITY WIDE elects to exercise any Option to Purchase as provided, it will have the right to set off all amounts due from Franchisee under this Agreement, and the cost of the appraisal, if any, against any payment. CITY WIDE shall have up to twelve (12) months to pay the entirety of the agreed upon purchase price, upon its exercise of its Option to Purchase the business contained herein. CITY WIDE must pay at fifty percent (50%) of the purchase price at the time of exercising its Option to Purchase to defer payment of the remainder over a six (6) month period.
- 20.2 If Franchisee or its owners propose to sell the Franchised Business (or its assets) or part or all of the ownership of Franchisee, Franchisee or its owners will deliver a bona fide, executed written offer to purchase same to CITY WIDE, who will, for a period of sixty (60) days from the date of delivery of such offer, have the right, but not the obligation, exercisable by written notice to Franchisee or its owners, to purchase the Franchised Business (or its assets) or such ownership for the price and payment terms contained in such bona fide offer, provided that CITY WIDE may substitute cash for any form of payment proposed in such offer and may require Franchisee to enter into an asset purchase agreement or similar agreement containing the terms and conditions that are customary for such a transaction ("Right of First Refusal"). If CITY WIDE does not exercise its Right of First Refusal, the offer may be accepted by Franchisee or its owners, subject to the prior written approval of CITY WIDE, as provided in Section 22 of this Agreement; provided that if such offer is not so accepted by Franchisee within one hundred twenty (120) calendar days of the date of such offer, or if the offer is modified in any material way from the original bona fide offer presented to CITY WIDE, CITY WIDE will again have this Right of First Refusal. Should a transferee franchisee assume the rights and obligations under this Agreement, such transferee franchisee will likewise be subject to CITY WIDE's Right of First Refusal under the terms and conditions as set forth in this Agreement.
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, City Wide has two distinct options to purchase a franchisee's business. The first, the "Option to Purchase," arises upon termination or expiration of the franchise agreement, giving City Wide sixty (60) calendar days to provide written notice of its intent to purchase the franchisee's assets. If City Wide exercises this option, it has up to twelve (12) months to pay the agreed-upon purchase price, with an initial payment of fifty percent (50%) due upon exercising the option.
The second option is the "Right of First Refusal," which comes into play if a franchisee proposes to sell their business or ownership interest. In this case, the franchisee must deliver a written offer to City Wide, which then has sixty (60) days from the date of delivery to exercise its right to purchase the business or ownership interest on the same terms as the offer. City Wide can substitute cash for any proposed form of payment. If City Wide does not exercise its Right of First Refusal and the franchisee's offer is not accepted within one hundred twenty (120) days or is materially modified, City Wide regains its Right of First Refusal.
These provisions are typical in franchising, allowing the franchisor to maintain control over the brand and ensure a smooth transition if a franchisee exits the system. The Right of First Refusal is a common mechanism to prevent unwanted or unqualified buyers from entering the franchise network. The Option to Purchase upon termination provides City Wide with a safety net to acquire successful locations or prevent them from falling into the hands of competitors. A prospective franchisee should consider these terms carefully, as they impact the franchisee's ability to sell the business freely and realize its full market value.