What is the relationship between the Bojangles's Item 5 development fee and the franchisor's litigation as described in Item 3?
Bojangles Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 5: INITIAL FEES]
ITEM 5 INITIAL FEES
Development Fee
You must pay a development fee of $10,000 for each Restaurant that we authorize you to develop when you sign the Development Agreement regardless of whether you actually develop Restaurants after that time. When you sign the Development Agreement, you also will sign a Franchise Agreement for the first Restaurant that you plan to develop.
The development fee is fully earned and non-refundable in consideration of administrative and other expenses we incur in entering into the Development Agreement and for our lost or deferred opportunity to enter into the Development Agreement with others.
During our previous fiscal year, the development fee paid to us for each Restaurant under applicable development agreements was $10,000 for our standard development.
Franchise Fee
Under the Franchise Agreement, you must pay a franchise fee of $35,000 by the construction commencement deadline of the traditional Restaurant that you agreed to develop according to the development schedule in your Development Agreement. We will credit the development fee that you paid for each Restaurant that you develop under the Development Agreement against the franchise fee that you pay for that Restaurant if you sign the Franchise Agreement and pay the applicable franchise fee by the time you commence construction of the Restaurant.
The franchise fee for each Individual Franchise Agreement is $35,000 and is payable upon execution of the Individual Franchise Agreement.
You must pay a franchise fee of $20,000 when you sign the Bojangles Express Franchise Agreement for a Bojangles Express Restaurant.
All franchise fees are fully earned and non-refundable when paid.
Some franchisees may be "grandfathered" under earlier agreements that establish franchise fees, royalties and contributions to the Marketing Development Fund in amounts less than described in this disclosure document.
During our previous fiscal year, the franchise fee paid us for each Bojangles Express Restaurant was $20,000 and the franchise fee paid to us for all other Restaurants ranged from $25,000 (for certain franchisees grandfathered into previously negotiated terms) to $35,000 per Restaurant.
Extension Fee
[Item 3: LITIGATION]
ITEM 3 LITIGATION
Pending Matters
Bojangles' of America Franchisee Association, Inc. v. Bojangles Opco, LLC, Case No. 24-CVS-3738 (N.C. Super. Ct., Guilford Cty.) (the "Guilford County Case") and Bojangles Restaurants, Inc. and Bojangles Opco, LLC v. Bojangles' of America Franchisee Association, Inc. and Berkowitz Pollack Brant, Case No. 24-CV018004-590 (N.C. Super Ct., Mecklenburg Cty.) (the "Mecklenburg County Case). On March 4, 2024, Bojangles' of America Franchisee Association ("BFA"), which is a franchisee association whose members operate Bojangles restaurants, filed a complaint in the Guilford County Case against us asserting claims for breach of an oral agreement and commission of unfair and deceptive trade practices in violation of NC Gen. Stat. § 75-1.1. The complaint seeks: (i) an order of specific performance compelling us to provide information to the BFA to complete an audit of the Bojangles Marketing Development Fund and an audit of an Accrual Account under a Master Distribution Agreement between our affiliate, Bojangles Restaurants, Inc., and McLane Foodservice, Inc. ("McLane"), a supplier to Bojangles restaurants; (ii) a declaration that the BFA has a right to conduct an annual audit of the Marketing Development Fund and the Accrual Account; and (iii) a determination that our actions with respect to the audit constitute an unfair and deceptive trade practices giving rise to a claim for attorneys' fees. The complaint does not seek any monetary damages from us. We intend to vigorously defend against these claims. On March 15, 2024, we filed a motion to seal the complaint and its exhibits because they disclose confidential and proprietary information about the Bojangles system. The court granted our motion on March 18, 2024 and sealed the complaint and its exhibits and ordered the plaintiffs to file redacted versions. The plaintiffs filed redacted versions without first conferring with us and failed to fully redact our confidential and proprietary information. On April 19, 2024, we submitted a motion to compel the plaintiffs to redact specific portions
What This Means (2025 FDD)
According to Bojangles's 2025 Franchise Disclosure Document, Item 5 outlines the initial fees, including the development fee, while Item 3 details any pending litigation. The document states that a development fee of $10,000 is required for each restaurant a developer is authorized to develop under a Development Agreement. This fee is paid when the agreement is signed and is considered fully earned and non-refundable by Bojangles due to administrative and other expenses. The development fee can be credited against the franchise fee if the franchisee signs the Franchise Agreement and pays the applicable franchise fee by the time construction commences. The franchise fee is $35,000, but can be $20,000 for a Bojangles Express Restaurant.
Item 3 of the FDD discusses pending litigation involving Bojangles' of America Franchisee Association, Inc. The litigation includes claims for breach of an oral agreement and unfair and deceptive trade practices. The franchisee association seeks specific performance to obtain information for auditing the Bojangles Marketing Development Fund and an Accrual Account. The complaint does not seek monetary damages from Bojangles.
Based on the excerpts, there is no direct financial relationship between the development fee described in Item 5 and the litigation described in Item 3. The development fee is a standard initial fee paid by franchisees for development rights, while the litigation involves a dispute with a franchisee association regarding access to financial records and alleged unfair practices. The outcome of the litigation would not directly impact the development fee structure or amount, although it could potentially affect the overall relationship between Bojangles and its franchisees and the perceived value of the franchise opportunity.
Prospective franchisees should be aware of both the initial investment requirements, including the development fee, and any ongoing legal disputes that could affect the franchise system. It is important to review the full FDD and discuss any concerns with current franchisees and legal counsel before making an investment decision.