What happens to the operational goodwill of the Dq Treat franchise upon termination of the agreement?
Dq_Treat Franchise · 2025 FDDAnswer from 2025 FDD Document
14.5 Purchase Option. Company may purchase or designate a third party to purchase any or all of the assets of the Restaurant that are owned by Licensee or any of Licensee's affiliates including the land, building, equipment, fixtures, signage, furnishings, supplies, leasehold, leasehold improvements, and inventory of the Restaurant, upon the following conditions:
(A) Company must give Licensee written notice of its intent to exercise its purchase rights under this section 14.5 within 30 days after the date of the expiration or termination of this agreement.
(B) The purchase will be at a price determined by a qualified appraiser paid for by Company and selected with the consent of both parties.
The price determined by the appraiser will be the reasonable fair market value of the assets based on their continuing use in, as, and for the operation of a DQ® Treat restaurant and the appraiser will designate a price for each category of asset (e.g., land, building, equipment, fixtures, etc. but not good will).
Source: Item 17 — The following paragraph is added to the end of Item 17 of the Disclosure Document: (FDD pages 70–378)
What This Means (2025 FDD)
According to the 2025 Dq Treat Franchise Disclosure Document, the company does not consider goodwill when determining the fair market value of the assets if Dq Treat exercises its purchase option after termination. Specifically, if Dq Treat decides to purchase the assets of the restaurant, the purchase price will be determined by a qualified appraiser.
The appraiser will assess the reasonable fair market value of the assets based on their continued use as a Dq Treat restaurant, and will designate a price for each category of asset such as land, building, equipment, and fixtures. However, the appraisal will explicitly exclude any valuation of goodwill.
This means that upon termination or expiration of the franchise agreement, Dq Treat does not compensate the franchisee for the goodwill that the franchisee may have built up in the business. This is a significant consideration for prospective franchisees, as the goodwill of a business can be a substantial asset, especially for a well-established location. Franchisees should be aware that they will not be compensated for this intangible asset if Dq Treat chooses to purchase the restaurant's assets upon termination.