If Crave elects to purchase a franchisee's interest for a reasonable cash equivalent due to a third-party offer involving non-cash consideration, and the parties disagree on the cash equivalent, how is the cash equivalent determined, and who pays for the appraisal?
Crave Franchise · 2025 FDDAnswer from 2025 FDD Document
14.4.2 In the event an offer from a third party provides for payment of consideration other than cash or involves certain intangible benefits, we may elect to purchase the interest proposed to be sold for the reasonable cash equivalent. If the parties cannot agree within a reasonable time on the reasonable cash equivalent of the non-cash part of the Offer Terms, then such amount shall be determined by two (2) appraisers, with each party selecting one (1) appraiser, and the average of their determinations shall be binding. In the event of such appraisal, each party shall bear its own legal and other costs, and each shall pay one-half (1/2) of the appraisal fees. In the event that we exercise our right of first refusal herein provided, we shall have the right to set off against any payment therefor (i) all fees for any such independent appraiser due from you hereunder and (ii) all amounts due from you to us.
Source: Item 23 — RECEIPTS (FDD pages 63–253)
What This Means (2025 FDD)
According to Crave's 2025 Franchise Disclosure Document, if a third party offers consideration other than cash for a franchisee's interest, Crave has the option to purchase that interest for a reasonable cash equivalent. If Crave and the franchisee cannot agree on what constitutes a reasonable cash equivalent, the determination is made through an appraisal process.
Specifically, each party (Crave and the franchisee) selects one appraiser. The average of the two appraisers' determinations becomes the binding cash equivalent value. This mechanism ensures an objective valuation when the initial parties' negotiations reach an impasse.
Regarding the costs associated with the appraisal, each party is responsible for their own legal and other related costs. Additionally, each party pays one-half (1/2) of the appraisal fees. This cost-sharing arrangement incentivizes both parties to select appraisers who will provide reasonable and well-supported valuations, as excessively high or low appraisals could be challenged and would still require the party to cover half of the appraiser's fees. Crave also has the right to offset any fees for the independent appraiser due from the franchisee, as well as any amounts the franchisee owes to Crave, against any payment made to the franchisee.