What is the timeframe for Devon Creek to exercise its option to purchase assets after termination or expiration?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
- 18.2.1 Franchisor shall have the option, to be exercised within ten (10) days after termination or expiration of this Agreement, to purchase from Franchisee any or all of the equipment (including any computer systems and vehicles), signs, fixtures, advertising materials, supplies, and inventory of Franchisee related to the operation of the Franchised Business, at Franchisee's cost or fair market value, whichever is less.
Franchisor shall purchase Franchisee's assets free and clear of any liens, charges, encumbrances or security interests and Franchisor shall assume no liabilities whatsoever, unless otherwise agreed to in writing by the parties.
If the parties cannot agree on the fair market value within ten (10) days of Franchisor's exercise of its option, fair market value shall be determined by two (2) appraisers, with each party selecting one (1) appraiser, and the average of their determinations shall be binding.
In the event of such appraisal, each party shall bear its own legal and other costs and shall split the appraisal fees equally.
If Franchisor elects to exercise its option to purchase herein provided, it shall have the right to set off (i) all fees for any such independent appraiser due from Franchisee, (ii) all amounts due from Franchisee to Franchisor or any of its affiliates and (iii) any costs incurred in connection with any escrow arrangement (including reasonable legal fees), against any payment therefor and shall pay the remaining amount in cash.
Closing of the purchase shall take place no later than thirty (30) days after determination of the fair market value.
Source: Item 22 — CONTRACTS (FDD page 45)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, Devon Creek has an option to purchase a franchisee's assets after the franchise agreement terminates or expires. Devon Creek has ten days after the termination or expiration date to exercise this option.
This option allows Devon Creek to acquire equipment, signs, fixtures, advertising materials, supplies, and inventory related to the franchise's operation. The purchase price will be the franchisee's cost or the fair market value of the assets, whichever is less. This protects Devon Creek from overpaying for assets that may have depreciated, while also ensuring the franchisee receives fair compensation.
If Devon Creek decides to purchase the assets, it must do so free and clear of any liens, charges, encumbrances, or security interests. Devon Creek also does not assume any liabilities unless both parties agree otherwise in writing. This clause protects Devon Creek from inheriting any financial burdens or legal issues associated with the franchisee's business operations. If the parties cannot agree on the fair market value of the assets within ten days of Devon Creek exercising its option, the fair market value will be determined by two appraisers, one selected by each party, and the average of their determinations will be binding.
The closing of the purchase must occur no later than thirty days after the fair market value is determined. Devon Creek can deduct any fees owed by the franchisee, amounts due to Devon Creek or its affiliates, and costs related to any escrow arrangement from the purchase price. This provides Devon Creek with a mechanism to offset any outstanding debts or expenses against the payment for the assets, streamlining the transaction process.