As of December 31, 2022 and 2021, were the Class B units in Beggars Pizza vested?
Beggars_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
ed $10,010 and $9,166, respectively, and are included in accounts payable on the balance sheet.
3. Members' Equity
BPF Holding Corporation wholly owns the Class A Membership interest of Beggars Pizza Franchise, LLC. In accordance with the operating agreement (the "Agreement") of the Company, the Company issued Class B and C member units as profits interest units. Pursuant to the Agreement, Class B units vest only upon the achievement of certain hurdles, and Class C units are immediately vested. As of December 31, 2024 and 2023, Class B units are not vested. For the years ended December 31, 2024 and 2023, there was no compensation expense related to the issuance of the Class B and C units.
Voting rights are allocated to each member class based on the provisions of the Agreement. A general description of the Agreements distribution provisions are as follows:
First, 100 percent to Class A members' pro rata until the cumulative distributions received by the members equals $4,176,000.
Second, 100 percent to the Class B and C members in proportion to their vested percentage until the cumulative distributions received by such members equals $2,435,999.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Beggars Pizza's 2025 Franchise Disclosure Document, the Class B units were not vested as of December 31, 2022 and 2021. The document specifies that BPF Holding Corporation owns the Class A Membership interest in Beggars Pizza Franchise, LLC. The company issued Class B and C member units as profits interest units. Class B units vest only upon achieving certain hurdles, while Class C units are immediately vested. For the years ending December 31, 2022 and 2021, there was no compensation expense related to the issuance of the Class B and C units.
This information is relevant to prospective franchisees as it outlines the equity structure within the Beggars Pizza franchise system. The vesting of Class B units is tied to specific performance hurdles, which suggests that certain members or stakeholders have incentives linked to the company's achievements. The fact that these units were not vested as of the stated dates indicates that those performance targets had not yet been met.
The distribution of profits within Beggars Pizza is structured in tiers. First, 100% of distributions go to Class A members until they cumulatively receive $4,176,000. Second, 100% of distributions go to Class B and C members in proportion to their vested percentage until they cumulatively receive $2,435,999. After these initial distributions, profits are distributed pro rata based on vested percentages: 63.2% to Class A, 30% to Class B, and 6.8% to Class C. This distribution hierarchy highlights the priority of Class A members in receiving initial distributions, followed by Class B and C members, with a final pro-rata distribution based on the vested percentage of each class.
For a potential franchisee, understanding the equity and distribution structure can provide insight into the financial incentives and priorities of different stakeholders within the Beggars Pizza organization. It is important to note that the Class B units not being vested could influence the motivations and actions of those holding these units, as their potential share of profits is contingent on meeting specific performance criteria. Further investigation into what these 'certain hurdles' are would be a prudent step for any prospective franchisee.