How is the purchase price determined if Cream exercises its option to purchase the franchisee's business?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Agreement | Summary |
|---|---|---|
| of first refusal, or there is a material change in terms, we will have an additional right of first refusal. | ||
| (o) Franchisor’s | Franchise Agreement | We may purchase any or all of the assets of your Shop (including |
| option to | – Section 15.D | the Premises, if it is owned by you or one of your owners or |
| purchase | affiliates) upon the termination or expiration of the Franchise | |
| franchisee’s | Agreement. The purchase price will be based upon the net | |
| business | realizable value of the tangible assets in accordance with the liquidation basis of accounting. We may exercise this right by giving you written notice of our election within 30 days after the termination or expiration. If challenged, the purchase price will be determined by an appraiser designated by us, with costs and fees shared equally by both parties. While any decision regarding purchasing your Shop is pending, we may operate your Shop on an interim basis as provided in the Franchise Agreement. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 44–51)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, if Cream chooses to purchase the assets of a franchisee's shop upon termination or expiration of the Franchise Agreement, the purchase price will be based on the net realizable value of the tangible assets, calculated using the liquidation basis of accounting. Cream must provide written notice of its intent to purchase within 30 days after the termination or expiration of the agreement.
If the franchisee challenges Cream's determined purchase price, an appraiser designated by Cream will determine the final purchase price. The costs and fees associated with the appraiser are shared equally between Cream and the franchisee. This process ensures an independent valuation, although the initial selection of the appraiser is controlled by Cream.
During the period when Cream is considering whether to purchase the shop, Cream has the right to operate the shop on an interim basis, as stipulated in the Franchise Agreement. This allows Cream to maintain operations while the purchase decision and price determination are pending. This could impact the franchisee if they have plans contingent on the sale of the business, as Cream effectively controls the business during this interim period.