What is the maximum allowable debt-to-equity ratio for a Bojangles franchisee as of the Effective Date, excluding land and building acquisition, but including equipment, inventory, training, fees, and other startup costs?
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 23 — RECEIPTS (FDD pages 82–573)
What This Means (2025 FDD)
According to Bojangles's 2025 Franchise Disclosure Document, a franchisee must maintain a debt-to-equity ratio no greater than 1.5 to 1 as of the Effective Date. This calculation specifically excludes any equity interests in, or debts incurred as a result of, acquiring the land and building for the Bojangles restaurant. However, it does include equity interests in, and debts incurred as a result of, acquiring equipment, inventory, training, franchise fees, start-up costs, initial point of purchase materials, landscaping, signage, and prepaid expenses.
This requirement means that for every $1 of equity a Bojangles franchisee has in the business (excluding land and building), they can have no more than $1.50 of debt related to the included items. This debt-to-equity ratio is a financial health indicator, ensuring franchisees don't over-leverage their business, which could lead to financial instability.
Prior to signing the Franchise Agreement, a prospective Bojangles franchisee must provide evidence, satisfactory to Bojangles, demonstrating compliance with this debt-to-equity ratio requirement. This ensures that all franchisees meet the minimum financial standards set by Bojangles before commencing operations.