What is the maximum allowable debt-to-equity ratio for a Bojangles franchisee's restaurant as of 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, as of the Effective Date of the Franchise Agreement, a franchisee must maintain a debt-to-equity ratio no greater than 1.5 to 1 for their restaurant. This requirement is designed to ensure the financial stability of the franchisee's business. The franchisee must furnish evidence satisfactory to Bojangles, prior to the execution of the agreement, demonstrating compliance with this ratio.
When calculating this ratio, the agreement specifies certain exclusions and inclusions. Equity interests and debts related to the acquisition of land and buildings are excluded from the calculation. However, equity interests and debts incurred as a result of acquiring equipment, inventory, training, the franchise fee, start-up costs, initial point of purchase materials, landscaping, signage, and prepaid expenses are included in the calculation.
This debt-to-equity ratio requirement has significant implications for prospective Bojangles franchisees. It means that franchisees need to have a solid equity base or secure financing that aligns with these requirements. The exclusion of land and building costs from the calculation may provide some relief, especially in areas with high real estate costs. However, franchisees should carefully plan their financing strategy to ensure they meet Bojangles's requirements and can provide the necessary evidence of compliance before signing the Franchise Agreement.