What is excluded from the purchase price calculation when Fitstop purchases assets from a terminated franchisee?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
- 16.6 Option to Purchase Operating Assets of Franchised Business. Upon termination of this Agreement, we have the option but not obligation to purchase from you any merchandise on hand or on order by you, and those items of equipment or other tangible items used in the operation of the Franchised Business as may be indicated by us.
The purchase price for such items will be equal to their net depreciated book value, without any allowance for your going business value or goodwill.
The terms of any purchase will be negotiated at the time of the sale, but must include typical representations and warranties by you with respect to all the rights and other assets being assigned free and clear of all liens and encumbrances.
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, if the franchise agreement is terminated, Fitstop has the option to purchase specific assets from the franchisee. These assets include merchandise on hand or on order, as well as equipment or other tangible items used in the operation of the franchised business.
The purchase price for these items will be based on their net depreciated book value. This calculation specifically excludes any allowance for the franchisee's going business value or goodwill. In simpler terms, Fitstop will not pay for the brand recognition, customer base, or potential future earnings that the business might have.
The terms of the purchase will be negotiated at the time of the sale and must include typical representations and warranties from the franchisee. These warranties ensure that the assets being sold are free and clear of all liens and encumbrances, meaning there are no outstanding debts or claims against them. This protects Fitstop from assuming any liabilities associated with the purchased assets.
This arrangement has significant implications for a franchisee whose agreement is terminated. They will not receive any compensation for the value of the business they have built, only the depreciated value of tangible assets. This highlights the importance of adhering to the franchise agreement and avoiding termination, as the financial consequences can be substantial.