Who designates the independent appraiser to determine the cash equivalent of non-cash consideration in a Pearce Bespoke franchise transfer?
Pearce_Bespoke Franchise · 2025 FDDAnswer from 2025 FDD Document
- (d) If the offer from a third-party provides for payment of consideration other than cash or involves certain intangible benefits, we may elect to purchase the interest proposed to be sold for the reasonable cash equivalent, or any publicly-traded securities, including its own, or intangible benefits similar to those being offered. If the parties cannot agree within a reasonable time on the reasonable cash equivalent of the non-cash part of the offer, then such amount shall be determined by an independent appraiser designated by us, and such appraiser's determination shall be binding.
Source: Item 23 — RECEIPTS (FDD pages 39–172)
What This Means (2025 FDD)
According to Pearce Bespoke's 2025 Franchise Disclosure Document, in the event that a third-party offer to purchase a franchisee's interest includes non-cash consideration, Pearce Bespoke has the right to purchase the interest for a reasonable cash equivalent. If Pearce Bespoke and the franchisee cannot agree on the cash equivalent of the non-cash consideration within a reasonable time, an independent appraiser will determine the amount. Pearce Bespoke has the authority to designate this independent appraiser. The appraiser's decision will be binding on both parties.
This clause protects Pearce Bespoke's interests by ensuring that if a franchisee receives an offer with difficult-to-value non-cash components, Pearce Bespoke can still exercise its right of first refusal by paying a reasonable cash equivalent. This prevents a franchisee from potentially structuring an offer with inflated non-cash values to circumvent Pearce Bespoke's right of first refusal.
For a prospective franchisee, this means that if they plan to sell their franchise, they should be aware that Pearce Bespoke has the right to match any offer, including those with non-cash components. If there's a disagreement on the value of non-cash consideration, the franchisee will be bound by the decision of an appraiser chosen by Pearce Bespoke. Therefore, it is crucial to ensure that any offer received is transparent and accurately reflects the fair market value of all consideration involved.
It is typical in franchising for the franchisor to retain control over franchise transfers to maintain brand consistency and protect the franchise system. The right to designate the independent appraiser is another mechanism Pearce Bespoke uses to maintain this control and ensure fair valuation in franchise transfers.