Is a Chocolate Fish Coffee franchisee required to participate personally in the direct operation of their business?
Chocolate_Fish_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
- 2.4 Principal Executive. Franchisee agrees that the person designated as the "Principal Executive" on the Summary Page is the executive primarily responsible for the Business and has decision-making authority on behalf of Franchisee.
The Principal Executive must have at least 10% ownership interest in Franchisee.
The Principal Executive does not have to serve as a day-today general manager of the Business, but the Principal Executive must devote substantial time and attention to the Business.
If the Principal Executive dies, becomes incapacitated, transfers his/her interest in Franchisee, or otherwise ceases to be the executive primarily responsible for the Business, Franchisee shall promptly designate a new Principal Executive, subject to Chocolate Fish Franchising's reasonable approval.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD page 32)
What This Means (2024 FDD)
According to the 2024 Chocolate Fish Coffee FDD, the franchisee is not required to serve as a day-to-day general manager. However, if the franchisee is an individual, they must designate a "Principal Executive" who has at least 10% ownership interest in the franchise.
The Principal Executive must devote substantial time and attention to the Chocolate Fish Coffee business. This indicates that while daily management can be delegated, the Principal Executive needs to be actively involved in overseeing the business's operations and strategic direction.
If the Principal Executive dies, becomes incapacitated, transfers their interest, or otherwise ceases to be the executive primarily responsible for the business, the franchisee must promptly designate a new Principal Executive, subject to Chocolate Fish Franchising's approval. This ensures that there is always a responsible party overseeing the Chocolate Fish Coffee franchise, even if they are not involved in the day-to-day operations.