Under what circumstances can Burger King issue Preferred Stock, and who can determine the rights and preferences associated with it?
Burger_King Franchise · 2025 FDDAnswer from 2025 FDD Document
The Preferred Stock may be issued from time to time in one or more series, with such designation or title, in such number of shares and with the relative rights and preferences (a) as may be fixed by resolution of the Board of Directors without further action by shareholders, (b) as may be fixed by the shareholders, or (c) as set forth below; provided, however, that in no event will holders of outstanding shares of Preferred Stock have rights more extensive than the following:
Source: Item 22 — CONTRACTS (FDD pages 125–127)
What This Means (2025 FDD)
According to Burger King's 2025 Franchise Disclosure Document, if a franchisee chooses to incorporate their Burger King business, the corporation can issue Preferred Stock under specific guidelines. Preferred Stock can be issued to immediate family members (spouse and children) of Common Stock holders or to key employees of the corporation. The rights and preferences of the Preferred Stock can be determined by a resolution of the Board of Directors without further action by shareholders, by the shareholders themselves, or as set forth in the corporate governing documents. However, the FDD stipulates that the rights of preferred stockholders cannot be more extensive than those outlined in the document.
Notably, the document cautions that issuing stock to family members and key employees may trigger security registration and sales laws, as well as other federal, state, and local regulations. Burger King franchisees are strongly advised to consult with an attorney before issuing any stock to ensure compliance with all applicable laws.
Furthermore, the holders of Preferred Stock are limited in their voting power. When voting on actions where they are entitled to vote under applicable law (excluding amendments that adversely affect their rights), their maximum vote is capped at 25% of the aggregate number of outstanding Preferred Stock and Common Stock combined. In the event of liquidation, dissolution, or asset distribution, Preferred Stock holders are entitled to no more than 25% of the proceeds, and they cannot receive any direct interest in the Burger King franchise itself, only proceeds from its disposition.