Upon termination or non-renewal of a Fitstop franchise, at what value may Fitstop acquire the operating assets of the Franchised Business?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
You must: (i) immediately cease use of all our Proprietary Marks, Confidential Information, trade secrets, and all aspects of the Franchise System; (ii) immediately return to us all advertising materials, products, or writing that contain, bear or otherwise use and of the Marks and IP, as well as all materials containing Confidential Information; (iii) pay all outstanding amounts due and owing to us under the Franchise Agreement; (iv) assign all telephone numbers and domain names associated with the Franchised Business to us (at our option) or otherwise cancel any registration for the same; (v) afford us (directly or via an operating affiliate) the right to (a) assume the lease for your Approved Premises, and/or (b) acquire all other operating assets associated with the Franchised Business at net depreciated book value, as detailed more fully in your Franchise Agreement; and (vi) comply with all confidentiality, non-disclosure and other post-term restrictive covenants detailed more fully below in this Item 17 Chart.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 42–47)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, upon termination or non-renewal of the franchise agreement, Fitstop has the option to acquire all operating assets associated with the Franchised Business at net depreciated book value. This means that Fitstop can purchase the assets of the business, such as equipment and inventory, at their original cost minus any depreciation that has been recorded on the company's books.
This clause is important for prospective franchisees to understand because it outlines the terms under which Fitstop can buy the business's assets if the franchise agreement ends. The franchisee is obligated to allow Fitstop to acquire the operating assets at the specified valuation.
The valuation method of "net depreciated book value" is a standard accounting term, but it's crucial for franchisees to fully understand how this will be calculated in practice. It is recommended that prospective franchisees seek professional financial advice to understand the implications of this valuation method and how it might affect the financial outcome upon termination or non-renewal of the franchise agreement. Understanding this aspect is vital for assessing the potential return on investment and financial risks associated with the Fitstop franchise.