How does the Bojangles's Item 9 initial inventory relate to the franchisor's litigation in Item 3?
Bojangles Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisor elects to lease, Franchisee shall lease the land and building to Franchisor on Franchisor's then-standard lease form for Bojangles restaurant sites operated by Franchisor, and Franchisor shall purchase the equipment, inventory and supplies at their depreciated net tangible book value, as defined above.
Net annual rental payments (payable monthly after taxes and expenses) shall be equal to the higher of fourteen percent (14%) of the depreciated net tangible book value, as defined above, of the land and Restaurant building, or six and one-half percent (6½%) of Gross Sales to the extent that Gross Sales do not exceed the amount of Gross Sales for the twelve (12) months preceding the commencement of occupancy by Franchisor, and five percent (5%) of Gross Sales that exceed that amount.
- (3) Franchisor shall exercise its right to purchase the Franchised Business by the later of sixty (60) days after the date of termination, the date it takes possession of the Restaurant pursuant to Paragraph XIV.E. hereof, or ten (10) days after the date upon which any litigation contesting the validity of the termination is finally adjudicated.
If Franchisor has taken possession of the Restaurant, it shall exercise its right to purchase the Restaurant or vacate the premises by the end of the foregoing period.
- E.
In order to maintain continuous operation of the Restaurant and to promote the best interests of the System, in the event this Agreement is terminated, Franchisor shall have the right immediately upon termination to enter and take possession of and operate the Restaurant.
Nothing herein contained in Paragraph XIV.E shall be intended to give Franchisor control of Franchisee's employees.
- F.
In the event that this Agreement is terminated and Franchisee contests the validity of the termination, the party that operates the Restaurant during the period commencing with the date that notice of termination was given and ending with the date upon which a final notice and nonappealable judgment resolving the issue is entered, shall operate the Restaurant for the benefit of the prevailing party in such contest, and shall account for, and pay over, any profits earned during said period to the other party, if such other party is the party that prevails.
What This Means (2025 FDD)
Based on the 2025 FDD, the information provided does not directly address how the initial inventory costs detailed in Item 9 relate to Bojangles's litigation history as disclosed in Item 3. The excerpts do discuss the purchase of inventory and supplies by the franchisor under specific conditions, such as the termination of a franchise agreement.
Specifically, if Bojangles terminates a Franchise Agreement and takes possession of the restaurant, they have the right to purchase the franchisee's equipment, inventory, and supplies. This purchase would be at the depreciated net tangible book value. The FDD also mentions that in the event of a dispute over a termination, the party operating the restaurant during the litigation period must account for any profits, which would indirectly involve the valuation of inventory during that time.
To fully understand the relationship between initial inventory costs and litigation, a prospective franchisee should carefully review Item 3 of the FDD for details on the types of claims, their potential financial impact, and how they might affect the franchisee's investment, including inventory. It would be prudent to ask the franchisor directly about any litigation that has involved disputes over inventory valuation, termination procedures, or the enforcement of purchase options upon termination, as these could have a financial impact on franchisees.