What is the franchisor's responsibility regarding the offering of securities by a Big Apple Bagels developer?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
(1) In the event Developer (or any of its owners) shall, subject to the restrictions and conditions of transfer contained in Paragraph B of Section 12 of this Agreement, attempt to raise or secure funds by the sale of securities (including, without limitation, common or preferred stock, bonds, debentures or general or limited partnership interests) in Developer or any affiliate of Developer, Developer, recognizing that the written information used with respect thereto may reflect upon Franchisor, agrees to submit any such written information to Franchisor prior to its inclusion in any registration statement, Franchise Disclosure Document, offering circular, or similar prospectus or memorandum and must obtain the written consent of Franchisor to the method of financing prior to any offering or sale of such securities. The written consent of Franchisor shall not imply or constitute the
approval of Franchisor with respect to the method of financing, the offering literature submitted to Franchisor or any other aspect of the offering. No information respecting Franchisor or any of its affiliates shall be included in any securities disclosure document, unless such information has been furnished by Franchisor, in writing pursuant to the written request of Developer, in which Developer states the specific purposes for which the information is to be used. Should Franchisor, in its sole discretion object to any reference to Franchisor or any of its affiliates or to any of their franchisees in such offering literature or prospectus, such literature or prospectus shall not be used unless and until the objections of Franchisor are withdrawn. Franchisor assumes no responsibility for the offering whatsoever.
(2) The prospectus or other literature utilized in any such offering shall contain the following language in bold-face type on the first textual page thereof:
"NEITHER BAB SYSTEMS, INC. NOR ANY OF ITS AFFILIATES IS DIRECTLY OR INDIRECTLY THE ISSUER OF THE SECURITIES OFFERED HEREBY. NEITHER BAB SYSTEMS, INC. NOR ANY OF ITS AFFILIATES ASSUMES ANY RESPONSIBILITY WITH RESPECT TO THIS OFFERING AND/OR THE ADEQUACY OR ACCURACY OF THE INFORMATION SET FORTH HEREIN, INCLUDING ANY STATEMENTS MADE WITH RESPECT TO ANY OF THEM. NEITHER BAB SYSTEMS, INC. NOR ANY OF ITS AFFILIATES ENDORSES OR MAKES ANY RECOMMENDATION WITH RESPECT TO THE INVESTMENT CONTEMPLATED BY THIS OFFERING."
Source: Item 23 — RECEIPTS (FDD pages 87–319)
What This Means (2025 FDD)
According to Big Apple Bagels' 2025 Franchise Disclosure Document, if a developer attempts to raise funds through the sale of securities, they must submit any written information related to the offering to Big Apple Bagels prior to its inclusion in any registration statement, Franchise Disclosure Document, offering circular, or similar memorandum. The developer must also obtain written consent from Big Apple Bagels regarding the method of financing before offering or selling any securities. However, Big Apple Bagels' written consent does not imply approval of the financing method or the offering literature.
Big Apple Bagels assumes no responsibility for the securities offering itself. The FDD states that no information about Big Apple Bagels or its affiliates can be included in any securities disclosure document unless Big Apple Bagels furnishes the information in writing at the developer's request, specifying the intended use of the information. Big Apple Bagels retains the right to object to any reference to the company, its affiliates, or its franchisees in the offering literature, and the literature cannot be used until these objections are resolved.
The prospectus or other literature used in the offering must include a disclaimer in bold-face type on the first textual page. This disclaimer explicitly states that neither BAB Systems, Inc. nor its affiliates are the issuers of the securities, assume any responsibility for the offering's accuracy or adequacy, or endorse the investment. This requirement ensures that potential investors are aware that Big Apple Bagels is not involved in the securities offering and does not guarantee its success or legitimacy.