Under what circumstances does Crave have the option to purchase the assets of a franchised business?
Crave Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in Franchise Agreement | Summary | |
|---|---|---|---|
| m. | Conditions for franchisor approval of transfer | Section 14.2.2 | Conditions include you must pay all amounts due us or our affiliates, not otherwise be in default, sign a general release, and pay a transfer fee. Transferee must meet our criteria, complete training to our satisfaction and sign current Franchise Agreement |
| n. | Franchisor's right of first refusal to acquire franchisee's business | Section 14.4 | Within 30 days after notice, we have the option to purchase the transferred interest on the same terms and conditions. |
| o. | Franchisor's option to purchase franchisee's business | Sections 14.8 and 18.12 | We have the right to purchase the assets of the Franchised Business for fair market value (a) at any time during the term of your Franchise Agreement, or (b) on termination, non-extension or refusal of a successor term. |
Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 50–56)
What This Means (2025 FDD)
According to Crave's 2025 Franchise Disclosure Document, Crave has the option to purchase the assets of a franchised business under specific conditions. Crave can exercise this right at any time during the term of the Franchise Agreement. Additionally, Crave can purchase the assets upon the termination, non-extension, or refusal of a successor term for the franchise. In any of these scenarios, the purchase price will be the fair market value of the assets.
This provision in the Franchise Agreement means that a Crave franchisee may be required to sell their business assets back to Crave. This could occur if the franchisee decides not to renew the agreement, if Crave terminates the agreement due to a breach by the franchisee, or even at Crave's discretion during the franchise term. The franchisee would need to be prepared for the possibility of Crave exercising this option.
The determination of "fair market value" is critical in these situations. Franchisees should understand how this value will be assessed, whether through an independent appraisal or another method. Disputes over valuation could arise, potentially leading to legal challenges. It is also important to note that the FDD does not specify how the fair market value will be determined, which leaves room for interpretation and potential negotiation.
Many franchise agreements include similar clauses allowing the franchisor to purchase the franchise back under certain conditions, particularly upon termination or non-renewal. This allows the franchisor to maintain control over the brand and ensure consistent operations. However, the specific terms, such as the valuation method and the timing of the purchase option, can vary significantly. Prospective Crave franchisees should carefully review this section of the Franchise Agreement and seek legal counsel to fully understand their rights and obligations.