What is the maximum allowable debt-to-equity ratio for a Bojangles franchisee as of the Effective Date?
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, the Franchise Fee, 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 specific debt-to-equity ratio for their restaurant as of the Effective Date of the franchise agreement. This ratio must be no greater than 1.5 to 1. This means that for every $1 of equity the franchisee has in the restaurant, they can have no more than $1.50 of debt.
The calculation of this debt-to-equity ratio excludes equity interests and debts related to the acquisition of land and buildings. However, it does include equity interests and debts incurred for acquiring equipment, inventory, training, the franchise fee, start-up costs, initial point-of-purchase materials, landscaping, signage, and prepaid expenses.
Before the franchise agreement is executed, a prospective Bojangles franchisee must furnish evidence satisfactory to Bojangles, demonstrating their compliance with this debt-to-equity ratio requirement. This ensures that franchisees have a solid financial foundation and are not over-leveraged from the outset, which could impact their ability to successfully operate the franchise.