Corporate's right to buy assets at agreement termination

I just re-read my franchise agreement because I haven't done so in a long time. Then I remembered why I don't ... because it always makes my blood pressure go up.

My agreement says that if I allow my agreement to terminate, they can give me notice within 30 days after termination that they want to buy some or all of the assets of my club. We then have to have everything appraised. They then (after the completion of the appraisal) have 45 days to decide what pieces they want. We must then "sell and deliver the purchased assets" ... sooo ... they really expect me to sit on all of my equipment for 90 days or more after my agreement terminates? Oh, and I get to pay for half of the appraisal, too.

I can see that getting out of this relationship is going to be a lot more like getting a divorce than business partners parting ways.

I would talk to a lawyer if i was you. If you have purchased your equipment outright, you may be able to fight it in court. Forcing you to sell something that is legally yours, may not bode well in a court of law. As far as the appraisal, I would tell them to kiss your @ss. If they want it so bad, make them pay. Also, you have the right to use your own appraiser, not one of their"paid-off" cohorts. If you are selling your equipment, I would also make it a court case if you have an offer higher then corporates. Bottom line is, don't let them push you around. Everytime they screw someone, it becomes a matter of record and more ammunition for all of us franchisees that are sick and tired of the hitler-mentality Mr. T has.

Snap HQ has a right of first refusal to buy your corporation or holding company. If you have a good offer, Snap must match it to take it off your hands, right? If your are running a successful club, they can't "steal" it if someone is willing to pay good money for your Snap franchise. They can't offer a lower price than a third party is willing to pay.

Supposing you don't have a decent third party offer at hand, then what's to stop you from selling your equipment prior to your franchise agreement expiration? Any appraiser will tell you that the depreciated value of your equipment will be less than 10% of the purchase price in the secondary market and I believe Snap has the right to pay 60% of that. Most leases have a $1 buyout after 3 or 5 years... why do you think that is? However your equipment is far more valuable as an ongoing concern, especially the strength equipment. HQ doesn't control the individual equipment assets prior to possessing your holding company, do they? For all they know, you could say each piece was total junk and written off for scrap. "Sell" your equipment to a third party prior to franchise expiration (to a close, but non-family associate), then use it to set up another fitness club, if that is your inclination. Or set up your own basement gym. Anything is better than letting HQ take it off your hands for pennnies on the dollar and profiting off your sweat.

HQ will try to buy your equipment at next to nothing using it to continue the operations of the club and milk existing members who are already used to the equipment. If it was good enough yesterday, it'll be good enough today. That's hugely profitable. HQ is unlikely to purchase brand new equipment because of the huge capital cost unless your club is extremely successful (in which case this premise is moot because you'll be able to find a decent buyer willing to pay more than HQ). Therefore, they'll most likely let the club fold. No club, no restrictions on setting up your own independent club and violating a non-compete clauses.

If HQ wants to play hardball, they'll find that you can just as easily play by scortched-earth tactics. It's a shame because nobody really wins when one side sees you as an adversary. The most successful franchises treat franchisees as partners rather than cows to be milked and slaughtered. Says a lot about Peter Taunton's business smarts and ethics. He is, after all, nothing more than a big box fitness club manager, not CEO material. I don't see MBA after his name.