What debt-to-equity ratio must a Bojangles franchisee maintain for their restaurant as of the Effective Date, and what items are included and excluded from the calculation?

According to Bojangles's 2025 Franchise Disclosure Document, a franchisee must maintain a specific debt-to-equity ratio for their restaurant as of the Effective Date. The franchisee must have a debt-to-equity ratio no greater than 1.5 to 1. This requirement ensures that franchisees have a reasonable level of equity in their business, which can contribute to financial stability. Franchisees must furnish evidence of compliance with this requirement to Bojangles before executing the Franchise Agreement. This evidence must be satisfactory to Bojangles, who has sole discretion over what is acceptable.

The calculation of this debt-to-equity ratio for Bojangles excludes equity interests in, and debts incurred as a result of, the acquisition of land and building. However, the calculation does 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. This means that while investments in the physical location (land and building) are not considered in the ratio, the costs associated with setting up the business and acquiring necessary assets are included.

This requirement has significant implications for prospective franchisees. It means that while they can finance the land and building separately, they need to have sufficient equity to cover a portion of the costs related to equipment, inventory, training, and other initial expenses. This could impact the amount of financing a franchisee needs to secure and the overall financial planning required to start a Bojangles franchise. Franchisees should carefully consider these factors and ensure they have adequate capital to meet this requirement before entering into a franchise agreement with Bojangles.