What is an 'Affiliated Entity' in the context of a Corner Bakery Cafe franchise?
Corner_Bakery_Cafe Franchise · 2025 FDDAnswer from 2025 FDD Document
At your request, the Franchise Agreement for any Cafe in the Development Area may be signed by an Entity formed by you to develop and operate the Cafe (an "Affiliated Entity") (and shall count as one of your Cafes for the purpose of satisfying the Development Schedule), provided all of the following conditions are met: (a) you or your Continuity Group (defined in Section 13.4.2 (Continuity Group) of the Initial Franchise Agreement) owns at least 66% of the voting securities of a corporate Affiliated Entity, at least 66% of the membership interests in a limited liability company Affiliated Entity, or all of the general partnership interests of a partnership Affiliated Entity; (b) the Affiliated Entity conducts no business other than the operation of one or more of the Cafes and meets our then-current criteria for Corner Bakery Cafe® franchisees; (c) you, your Continuity Group and all of your Principals sign a personal guaranty and agree to assume full and unconditional liability for, and agree to perform, all obligations, covenants and agreements contained in the Franchise Agreement; and (d) all owners of voting securities of a corporate Affiliated Entity, membership interests of a limited liability company Affiliated Entity or partnership interests of a partnership Affiliated Entity possess a good moral character, as determined by us in our sole discretion, and you provide to us all reasonably requested information to permit us to make such a determination.
Source: Item 23 — RECEIPTS (FDD pages 55–227)
What This Means (2025 FDD)
According to the 2025 Corner Bakery Cafe Franchise Disclosure Document, an 'Affiliated Entity' is defined as an entity formed by the franchisee to develop and operate a Corner Bakery Cafe within a Development Area, upon Corner Bakery Cafe's approval. This allows a franchisee to create a separate legal structure for managing one or more of their franchise locations. The franchise agreement for a cafe in the development area can be signed by this entity at the franchisee's request. This cafe will count toward fulfilling the development schedule outlined in the agreement.
However, several conditions must be met for an entity to qualify as an Affiliated Entity. The franchisee or their Continuity Group must own at least 66% of the voting securities if the entity is a corporation, at least 66% of the membership interests if it's a limited liability company, or all of the general partnership interests if it's a partnership. The Affiliated Entity's sole business activity must be operating Corner Bakery Cafe locations, and it must meet Corner Bakery Cafe's then-current criteria for franchisees.
Furthermore, the franchisee, their Continuity Group, and all Principals (owners) must provide a personal guarantee, assuming full liability for all obligations under the Franchise Agreement. All owners of the Affiliated Entity must also demonstrate good moral character, as determined by Corner Bakery Cafe, and provide any information reasonably requested to verify this. This ensures that Corner Bakery Cafe maintains control over who operates its franchises, even when using an Affiliated Entity structure.