Does a Designated Manager for Bor Restoration need to own any equity in the franchise business?
Bor_Restoration Franchise · 2024 FDDAnswer from 2024 FDD Document
Your Principal Operator, Designated Manager and you must complete our training, and at least one trained person must operate the Business from day to day. Though the Franchise Agreement does not require it, it is always recommended that your Principal Operator or you operate the Business from day to day, though your Designated Manager may take on this responsibility. If you have one, your Designated Manager must abide by all confidentiality requirements of the franchise agreement and may be required to sign our then-current confidentiality and non-competition agreement. Your Designated Manager is not required to own any interest in the Business. The Principal Operator must own no less than 10% of the equity in the franchisee business entity.
Source: Item 15 — Obligation to Participate in the Actual Operation of the Franchise Business (FDD pages 32–33)
What This Means (2024 FDD)
According to Bor Restoration's 2024 Franchise Disclosure Document, a Designated Manager is not required to own any equity in the franchise business. However, the Principal Operator must own no less than 10% of the equity in the franchisee business entity.
It is important to note that while the Designated Manager does not need to own equity, they must still abide by all confidentiality requirements outlined in the franchise agreement. They may also be required to sign Bor Restoration's then-current confidentiality and non-competition agreement. This ensures that the Designated Manager is legally bound to protect the franchisor's sensitive information and competitive advantages, even without an equity stake.
The Principal Operator, who must own at least 10% of the equity, is authorized to receive training, operate the business, and act as the contact between Bor Restoration and the franchisee. This equity requirement for the Principal Operator aligns their interests with the success of the franchise, encouraging active participation and commitment to the business's growth.
Prospective Bor Restoration franchisees should carefully consider the roles and responsibilities of both the Designated Manager and the Principal Operator, as well as the equity requirements for the latter. Understanding these distinctions is crucial for structuring their business and ensuring compliance with the franchise agreement.