Is there a specific accounting method used to determine the purchase price of the Cream franchisee's business?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
We have the option to purchase any or all of the assets of your Shop, including your Premises (if you or one of your owners or affiliates owns the Premises) upon termination or expiration of this Agreement. We have the unrestricted right to assign this option to purchase. We may exercise this option by giving you written notice within 30 days after the date of such termination or expiration. The purchase price for your Shop will be the net realizable value of the tangible assets in accordance with the liquidation basis of accounting (not the value of your Shop as a going concern). If you dispute our calculation of the purchase price, the purchase price will be determined by one independent accredited appraiser designated by us who will calculate the purchase price applying the criteria specified above. We agree to select the appraiser within 15 days after we receive the financial and other information necessary to calculate the purchase price (if you, and we have not agreed on the purchase price before then). You and we will share equally the appraiser's fees and expenses. The appraiser must complete its calculation within 30 days after its appointment. We may set off against the purchase price, and reduce the purchase price by, any and all amounts you or your owners owe us or our affiliates.
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 exercises its option to purchase a franchise location upon termination or expiration of the franchise agreement, the purchase price will be based on the net realizable value of the tangible assets. This valuation will be determined using the liquidation basis of accounting, not the value of the shop as an ongoing, operating business.
If the franchisee disputes Cream's calculation of the purchase price, an independent accredited appraiser designated by Cream will determine the price, applying the same criteria. Cream will select the appraiser within 15 days after receiving the necessary financial information, assuming the parties haven't already agreed on a price. The franchisee and Cream will equally share the appraiser's fees and expenses, and the appraiser must complete the calculation within 30 days of their appointment.
Cream retains the right to offset against the purchase price any amounts that the franchisee or their owners owe to Cream or its affiliates, effectively reducing the purchase price by the outstanding debt. This process ensures that any financial obligations to Cream are settled during the purchase of the franchise.