For a Bojangles franchisee, what debt and equity items are included in the debt-to-equity ratio calculation at the Effective Date, according to the franchise agreement?
Bojangles Franchise · 2025 FDDAnswer from 2025 FDD Document
- B. As of the Effective Date, Franchisee shall have, with respect to the Restaurant, 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. Franchisee shall, prior to the execution of this 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 22 — CONTRACTS (FDD page 82)
What This Means (2025 FDD)
According to Bojangles's 2025 Franchise Disclosure Document, a franchisee must maintain a debt-to-equity ratio of no greater than 1.5 to 1 as of the Effective Date of the Franchise Agreement. The calculation of this ratio includes specific debt and equity items related to the restaurant's acquisition and operation.
Specifically, the debt-to-equity calculation for a Bojangles franchise excludes equity interests and debts incurred from acquiring the land and building for the restaurant. However, it includes equity interests and debts resulting from the acquisition of equipment and inventory, training costs, the franchise fee, start-up costs, initial point of purchase materials, landscaping, signage, and prepaid expenses.
Prior to executing the Franchise Agreement, a prospective Bojangles franchisee must furnish evidence satisfactory to Bojangles that they comply with this debt-to-equity ratio requirement. This ensures that franchisees have a sound financial structure from the outset, which is intended to contribute to the stability and success of the franchise.