If Itan exercises its purchase option, what happens if I or my affiliate own the real estate?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
If we choose to exercise our purchase option, we will notify you of the assets we wish to purchase (the "Acquired Assets") within 20 days after the termination or expiration date.
If we exercise our purchase option we may require that: (i) you assign your lease to us at no additional charge (if you lease the premises); or (ii) you or your affiliate enter into a lease with us upon standard and commercially reasonable leasing terms, including rent at fair rental value, for a term of 10 years or such shorter term that we specify (if you or your affiliate own the real estate).
The purchase price for the Acquired Assets will be: (i) the purchase price established by the parties (if mutually agreed upon); or (ii) the Appraised Value established in accordance with §21.2(b) below.
We may, at our option, assign our purchase option to a designee of our choosing.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, if Itan chooses to exercise its purchase option and you or your affiliate own the real estate where the franchise is located, Itan may require you or your affiliate to enter into a lease with them. The lease terms would be standard and commercially reasonable, including rent at fair rental value. The lease term would be for 10 years or a shorter term specified by Itan.
This means that if Itan decides to purchase your franchise's assets upon termination or expiration of the franchise agreement, and you or an affiliate owns the property, you might not be able to sell the property outright to Itan. Instead, you may be required to lease the property to Itan under terms they deem commercially reasonable. This could impact your long-term financial plans for the property.
The purchase price for the acquired assets will be determined either by mutual agreement between you and Itan or through an appraisal process if you cannot agree on a price. The appraisal process involves either a single mutually agreed-upon appraiser or, if an agreement cannot be reached, each party appoints an appraiser, and those two appraisers jointly appoint a third. The fair market value will not include any value for goodwill and/or the franchise rights granted by the agreement.
It is important to note that Itan has the option to assign its purchase option to a designee of their choosing. This means that another entity could potentially be the one leasing the property from you or your affiliate. As a prospective franchisee, you should carefully consider the implications of this clause, especially if owning the real estate is a significant part of your investment strategy. Discuss with Itan what factors they consider to be 'standard and commercially reasonable leasing terms' to fully understand your potential obligations.