Does the Craters & Freighters Franchise Agreement specify what happens after the initial term?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
| Item | Provision | Section in Franchise Agreement | Summary |
|---|---|---|---|
| n. | Franchisor's right of first refusal to acquire franchisee's business | Section 17 | We have the first right of refusal on the sale of the franchise by you. |
| o. | Franchisor's option to purchase franchisee's business | Section 20.2 | Upon the termination or expiration of the Franchise Agreement, we will have the option, but not the obligation, to purchase any and all of the assets used by you to operate the Franchised Business at a purchase price equal to net depreciated book value. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTIONS (FDD pages 36–44)
What This Means (2025 FDD)
According to Craters & Freighters' 2025 Franchise Disclosure Document, Section 20.2 of the Franchise Agreement addresses the franchisor's option to purchase the franchisee's business upon termination or expiration of the agreement. Specifically, Craters & Freighters has the option, but not the obligation, to purchase any and all of the assets used by the franchisee to operate the Franchised Business. The purchase price will be equal to the net depreciated book value of those assets.
This clause means that when the franchise term ends, Craters & Freighters has the right to buy the franchisee's business assets, such as equipment and inventory, at a price based on their depreciated value. This provides Craters & Freighters with a potential avenue for continuing operations in that location, while ensuring the franchisee receives some compensation for their assets.
For a prospective franchisee, this is an important consideration. While it offers a guaranteed buyer for business assets at the end of the term, the price may not reflect the true market value of the business. It is also important to note that the franchisee is not obligated to sell, but Craters & Freighters has the option to buy. A potential franchisee should consider this when projecting their potential return on investment and exit strategy.