What happens if a Creative World School franchisee loses control of the School?
Creative_World_School Franchise · 2025 FDDAnswer from 2025 FDD Document
• If Franchisor has the option to purchase the business personal assets upon default or termination of the Franchise Agreement and the parties are unable to agree on the value of the assets, the value will be determined by an appraiser chosen by both parties. If the Franchisee owns the real estate where the franchise location is operating, Franchisee will not be required to sell the real estate upon default or termination, but Franchisee may be required to lease the real estate for the remainder of the franchise term (excluding additional renewals) for fair market value.
• If the Franchisee owns the real estate where the franchise location is operating, Franchisor may not record against the real estate any restrictions on the use of
the property, including any restrictive covenants, branding covenants or environmental use restrictions.
Source: Item 23 — RECEIPTS (FDD pages 80–247)
What This Means (2025 FDD)
The 2025 Creative World School Franchise Disclosure Document (FDD) addresses scenarios where a franchisee may be forced to sell assets due to default or termination of the Franchise Agreement. If Creative World School has the option to purchase the business's personal assets under these circumstances, and the parties cannot agree on the asset's value, an appraiser chosen by both parties will determine the value.
Notably, if the franchisee owns the real estate where the Creative World School is located, they are not required to sell the real estate upon default or termination. However, Creative World School may require the franchisee to lease the real estate for the remainder of the franchise term (excluding additional renewals) at fair market value. This provides a mechanism for Creative World School to potentially maintain the location's operation even if the franchisee loses the franchise.
Furthermore, the FDD states that Creative World School cannot record any restrictions on the use of the franchisee's real estate, such as restrictive covenants, branding covenants, or environmental use restrictions. This protects the franchisee's property rights, even if the school operation is no longer under their control. This section of the FDD outlines specific procedures and protections related to asset sales and real estate, but does not explicitly detail other circumstances that could lead to a loss of control.