Under what ownership condition is a Brueggers Bagels franchisee exempt from the personal obligations of owners, officers, directors, management personnel and spouses?
Brueggers_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
Each person who is or becomes an owner, director or officer of Franchisee must execute a Guaranty in the form we prescribe, undertaking to be bound jointly and severally by the terms of this Agreement including but not limited to those provisions in Section 19 above. The current form of Guaranty is attached to this Agreement as Exhibit B. Each person who is, or
becomes, an owner or executive officer of Franchisee must also execute a Confidentiality and Non-competition Agreement in a form we prescribe, the current form of which is attached to this Agreement as Exhibit C. If you are a publicly-held entity, the requirements in this Section will not apply to ownership by you of less than five percent (5%) beneficial interest. In addition, at our request, if the Guarantor resides in a community property state, the Guarantor will cause his or her spouse, if any, to execute a Guaranty and you must also obtain signed Confidentiality and Non-competition Agreements referred to above. Confidentiality and Non-competition Agreements must also be obtained from any manager who has received or will receive training from us.
Source: Item 22 — CONTRACTS (FDD page 61)
What This Means (2025 FDD)
According to the 2025 Brueggers Bagels Franchise Disclosure Document, a publicly-held entity is exempt from the personal obligations of owners, officers, directors, management personnel, and spouses if their beneficial interest is less than five percent (5%). This exemption pertains to the requirement that these individuals must execute a Guaranty and a Confidentiality and Non-competition Agreement.
In practical terms, this means that if a Brueggers Bagels franchise is owned by a corporation whose shares are traded on a public stock exchange, the standard personal guarantees and confidentiality agreements typically required from owners and officers do not apply to shareholders who own less than 5% of the company's stock. This provision acknowledges that it would be impractical to enforce such requirements on a large number of small shareholders in a publicly-traded company.
This condition provides a significant benefit to publicly-held entities seeking to become Brueggers Bagels franchisees, as it reduces the administrative burden and personal liability exposure for a large number of individuals. However, it's important to note that this exemption only applies to ownership of less than 5% beneficial interest. Any owner or executive officer holding 5% or more of the company's shares would still be required to execute the Guaranty and Confidentiality and Non-competition Agreement. Additionally, managers who receive training from Brueggers Bagels must also execute Confidentiality and Non-competition Agreements, regardless of the ownership structure.
Prospective franchisees should carefully consider this condition and consult with legal counsel to determine its applicability to their specific ownership structure. It is also important to verify with Brueggers Bagels that the current form of the Guaranty and Confidentiality and Non-competition Agreement are consistent with the terms described in the FDD.