What debt-to-equity ratio must a Bojangles Developer maintain at the date of execution of each Franchise Agreement, and what items are included and excluded in the calculation?
Bojangles Franchise · 2025 FDDAnswer from 2025 FDD Document
- (8) At the date of execution of each Franchise Agreement executed pursuant hereto, Developer shall have, with respect to the Restaurant referred to in such Franchise Agreement, a ratio of debt to equity no greater than 1.5 to 1. Calculation of a debt to equity ratio for purposes hereof shall exclude equity interests in, and debts incurred as a result of, the acquisition of land and building, but shall include equity interests in, and debts incurred as a result of, the acquisition of equipment and inventory, training, franchise fees, start-up costs, initial point of purchase materials, landscaping, signage, and prepaid expenses. Developer shall, prior to the execution of each such Franchise Agreement, furnish Franchisor with evidence, satisfactory to Franchisor in its sole discretion, of its compliance with the requirement set forth in this paragraph.
Source: Item 23 — RECEIPTS (FDD pages 82–573)
What This Means (2025 FDD)
According to Bojangles's 2025 Franchise Disclosure Document, a Developer must maintain a specific debt-to-equity ratio at the time of executing each Franchise Agreement. Specifically, the ratio of debt to equity should be no greater than 1.5 to 1 for each Restaurant. This requirement ensures that Developers have a reasonable level of equity to support their debt obligations, indicating financial stability to Bojangles.
The calculation of this debt-to-equity ratio for Bojangles excludes certain items. Equity interests and debts incurred from acquiring land and buildings are not included in the calculation. This exclusion acknowledges that real estate investments can significantly skew the ratio and are often financed differently.
However, the calculation does include equity interests and debts resulting from the acquisition of equipment and inventory, training, franchise fees, start-up costs, initial point of purchase materials, landscaping, signage, and prepaid expenses. These inclusions provide a more comprehensive view of the Developer's financial leverage related to the operational aspects of the Bojangles franchise. Prior to executing each Franchise Agreement, the Developer must furnish evidence satisfactory to Bojangles, demonstrating compliance with this debt-to-equity ratio requirement. This ensures Bojangles has the opportunity to assess the financial health of its Developers.