Does Fitstop have the obligation to purchase merchandise on hand or on order from the Fitstop franchisee upon termination?
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, Fitstop does not have an obligation to purchase merchandise on hand or on order from the franchisee upon termination of the franchise agreement. However, Fitstop does have the option to purchase any merchandise on hand or on order, as well as equipment or other tangible items used in the operation of the franchised business.
If Fitstop chooses to exercise this option, the purchase price for these items will be equal to their net depreciated book value, without any allowance for the franchisee's going business value or goodwill. The specific terms of the purchase will be negotiated at the time of the sale and must include typical representations and warranties from the franchisee, ensuring that all rights and assets are transferred free and clear of any liens or encumbrances.
This clause is important for prospective franchisees to understand, as it clarifies that they may not be able to recoup the full cost of their inventory or equipment if the franchise agreement is terminated. While Fitstop has the option to purchase these items, it is not obligated to do so, and the purchase price will be based on the depreciated book value, which may be significantly lower than the original cost or market value. Franchisees should carefully consider this factor when making investment decisions and managing their inventory levels.