When Fly Fitness exercises its option to purchase assets, at what value will the assets be purchased?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
r amounts payable under this Agreement and shall not affect Franchisor's right to obtain appropriate injunctive relief and remedies pursuant to any other provision of this Agreement; and
18.2. Right to Purchase.
18.2.1. Franchisor shall have the option, to be exercised within thirty (30) days after termination or expiration of this Agreement, to purchase from Franchisee any or all of the furnishings, equipment (including any point of sale system), 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 thirty (30) 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.
- 18.2.2.
Source: Item 22 — CONTRACTS (FDD pages 44–45)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, if Fly Fitness exercises its option to purchase a franchisee's assets upon termination or expiration of the franchise agreement, the purchase price will be the franchisee's cost or the fair market value of the assets, whichever is less. This includes furnishings, equipment (including any point of sale system), signs, fixtures, advertising materials, supplies, and inventory related to the operation of the franchised business. Fly Fitness will purchase these assets free and clear of any liens, charges, encumbrances, or security interests, and will not assume any liabilities unless otherwise agreed in writing.
If Fly Fitness and the franchisee cannot agree on the fair market value within 30 days of Fly Fitness exercising its purchase option, the fair market value will be determined by two appraisers. Each party will select one appraiser, and the average of their determinations will be binding. Each party will bear its own legal and other costs, and they will split the appraisal fees equally.
Fly Fitness has the right to offset certain costs against the payment for the assets. These costs include fees for any independent appraiser due from the franchisee, all amounts owed by the franchisee to Fly Fitness or its affiliates, and any costs incurred in connection with any escrow arrangement, including reasonable legal fees. The remaining amount will be paid in cash. The closing of the purchase must occur no later than 30 days after the determination of the fair market value.
The franchisee must deliver warranties, releases of lien, bills of sale, assignments, and other documents and instruments that Fly Fitness deems necessary to perfect its title and possession of the assets being purchased or assigned and to meet the requirements of all tax and government authorities.