How is the purchase price for a Golden Krust Caribbean Restaurant determined?
Golden_Krust_Caribbean_Restaurant Franchise · 2024 FDDAnswer from 2024 FDD Document
o assets; liens and encumbrances on assets; validity of contracts and agreements; and liabilities affecting the assets, contingent or otherwise.
(2) Leasehold Rights
You agree at our election:
- (a) to assign your leasehold interest in the Premises to us; or
- (b) to enter into a sublease for the remainder of the lease term on the same terms (including renewal options) as the prime lease.
(3) Purchase Price
The purchase price for the Restaurant will be its fair market value, determined in a manner consistent with reasonable depreciation of the Restaurant's equipment, signs, inventory, materials and supplies, provided that the Restaurant will be valued as an independent business and its value will not include any value for:
- (a) the franchise or any rights granted by this Agreement;
- (b) the Marks; or
- (c) participation in the network of Golden Krust Restaurants.
The Restaurant's fair market value will include the goodwill you developed in the market of the Restaurant that exists independent of the goodwill of the Marks and the System. The length of the remaining term of the lease for the Premises will also be considered in determining the Restaurant's fair market value.
We may exclude from the assets purchased hereunder cash or its equivalent and any equipment, signs, inventory, materials and supplies that are not reasonable necessary (in function or quality) to the Restaurant's operation or that we have not approved as meeting standards for Golden Krust Restaurants, and the purchase price will reflect such exclusions.
(4) Appraisal
If we and you are unable to agree on the Restaurant's fair market value, its fair market value will be determined by an independent appraiser appointed by mutual agreement, and the determination of the appraiser will be binding.
The purchase price will be paid at the closing of the purchase, which will take place not later than ninety (90) days after determination of the purchase price. We have the right to set off against the purchase price, and thereby reduce the purchase price by, any and all amounts you or our owners owe to us. At the closing you agree to deliver instruments transferring to us:
- (a) good and merchantable title to the assets purchased, free and clear of all liens and encumbrances (other than liens and security interests acceptable to us), with sales and other transfer taxes paid by you; and
- (b) all licenses and permits of the Restaurant which may be assigned or transferred;
Source: Item 22 — CONTRACTS (FDD page 35)
What This Means (2024 FDD)
According to Golden Krust Caribbean Restaurant's 2024 Franchise Disclosure Document, the purchase price for a restaurant is based on its fair market value. This valuation considers the goodwill that the franchisee developed independent of the Golden Krust Caribbean Restaurant brand, as well as the remaining term of the restaurant's lease. However, the valuation excludes the value of the franchise itself, the Golden Krust Caribbean Restaurant trademarks, and the benefits of being part of the Golden Krust Caribbean Restaurant network.
Golden Krust Caribbean Restaurant has the option to exclude assets like cash, equipment, signs, inventory, materials, and supplies from the purchase if they don't meet the brand's standards or aren't necessary for the restaurant's operation. The purchase price will be adjusted to reflect these exclusions. The document specifies that the purchase will be paid no later than 90 days after the purchase price is determined. Golden Krust Caribbean Restaurant also has the right to deduct any amounts owed by the franchisee from the purchase price.
If the franchisee and Golden Krust Caribbean Restaurant can't agree on the fair market value, an independent appraiser will determine the value. Both parties must mutually agree on the appraiser, and their decision will be binding. At closing, the franchisee must provide a clear title to the assets, transfer assignable licenses and permits, and transfer the leasehold interest in the premises. The franchisee must also provide general releases of claims against Golden Krust Caribbean Restaurant.
If the franchisee cannot provide clear title to the purchased assets, the sale will be managed through an escrow account. This process ensures that all conditions are met before the funds are fully disbursed. This valuation approach is typical in franchise agreements, aiming to provide a fair price based on the restaurant's performance and assets, while protecting the franchisor's brand value.