Is the Appraiser's determination of the Agreed Value binding on both Crisp & Green and the franchisee?
Crisp_Green Franchise · 2024 FDDAnswer from 2024 FDD Document
the Appraisal Notice, then the Agreed Value will be the Fair Market Value, consisting of the amount which an arm's length purchaser would be willing to pay for the Purchased Assets, less the cost of any required remodeling of the Franchised Premises if we have exercised our option on the lease.
The Fair Market Value will be determined by a member of a nationally recognized accounting firm (other than a firm which conducts audits of our financial statements) selected by us who has experience in the valuation of restaurant businesses (the "Appraiser"). We will notify you of the identity of the Appraiser, who will make his determination and submit a written report ("Appraisal Report") to you and us as soon as practicable, but in no event more than sixty (60) days after his appointment. You agree to promptly provide the Appraiser with such books and records as he or she may require, which you represent and warrant to be complete and accurate.
Source: Item 23 — RECEIPTS (FDD pages 66–252)
What This Means (2024 FDD)
According to Crisp & Green's 2024 Franchise Disclosure Document, the determination made by the Appraiser regarding the Fair Market Value is binding on both parties. Specifically, this determination becomes relevant if Crisp & Green exercises its option to purchase the franchisee's restaurant upon termination or expiration of the franchise agreement, and if the franchisee and Crisp & Green cannot agree on the value of the Purchased Assets within 15 days after the Appraisal Notice.
In such cases, Crisp & Green will select a nationally recognized accounting firm to act as the Appraiser. This firm must be different from any firm that conducts audits of Crisp & Green's financial statements. The Appraiser will then assess the Fair Market Value of the restaurant's personal property, excluding cash, short-term investments, and items not meeting Crisp & Green's specifications. The Appraiser will provide a written report to both the franchisee and Crisp & Green within 60 days of their appointment.
The franchisee is obligated to provide the Appraiser with complete and accurate books and records. If these records are missing or deemed unsatisfactory, the Appraiser can use other sources to determine the Agreed Value. The FDD states clearly that the Appraiser's final determination is binding on both Crisp & Green and the franchisee, meaning neither party can contest the valuation in court unless they can prove fraud or misconduct by the appraiser.