What are the payment terms if Deka Lash purchases the franchise after appraisal?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
If a suitable transferee or purchaser is not found within ninety days from the date of death or permanent incapacity, we may at our sole option enter into a contract to purchase the Franchise. Unless we state in writing that we do not intend to exercise this right, the parties must agree upon a purchase price and terms within twenty business days after notice from us. If not, a fair value and fair terms will be determined in Bountiful, Utah by three appraisers. Each party must select one appraiser. The two appraisers chosen must then select a third appraiser. The parties may then present evidence of the value of the Franchise and fair terms for the purchase. The appraisers may not include in their decision a factor for the "goodwill" or "going concern" value of the Franchise. The decision of the majority of the appraisers will be conclusive. Any time within thirty days after receiving the appraisers' decision, at our option, we may purchase the Franchise and your related assets at the price and upon the terms determined by the appraisers. Terms of payment will be ten percent of the purchase price payable upon contract signing, the balance payable in sixty equal monthly payments of principal payments with interest calculated at the prime rate, published by your principal bank at time of each monthly principal payment. Or,
Source: Item 23 — RECEIPT (FDD pages 63–234)
What This Means (2024 FDD)
According to the 2024 Deka Lash Franchise Disclosure Document, if Deka Lash chooses to purchase the franchise after a fair value is determined by appraisers, the payment terms are as follows: Deka Lash will pay ten percent of the purchase price upon signing the contract. The remaining balance will be paid in sixty equal monthly installments of principal, with interest calculated at the prime rate published by the franchisee's principal bank at the time of each monthly principal payment.
This arrangement provides a structured payment plan for Deka Lash, allowing them to spread the cost over five years while compensating the franchisee with interest. For the franchisee, this means receiving an initial payment upfront, followed by consistent monthly income, including interest, over the subsequent five years.
However, it's important to note that the appraisers determining the fair value cannot include any factor for the "goodwill" or "going concern" value of the franchise. This could potentially lower the overall purchase price, as these factors often contribute significantly to a business's valuation. Prospective franchisees should consider this when evaluating the potential resale value of their Deka Lash franchise.