Can the requirement for the Principal Owner to have a 10% interest in the Dog Haus franchise be waived?
Dog_Haus Franchise · 2025 FDDAnswer from 2025 FDD Document
You must designate a Principal Owner acceptable to us who will be responsible for the operational decisions of your Franchised Restaurant. Your Principal Owner must devote his or her full time to the Franchised Restaurant and must own at least 10% interest in your equity and voting rights (unless you are a publicly held entity or a wholly-owned subsidiary of a publicly-held entity) when you sign your Franchise Agreement. Under certain circumstances we may waive the requirement that your Principal Owner must have a 10% interest in your equity and voting rights. You must also designate a General Manager who will be the individual responsible for your Franchised Business in the absence of the Principal Owner. Your General Manager does not have to own an equity interest in you or the franchise. Your Franchised Restaurant must, at all times, be directly supervised by the Principal Owner. Your Principal Owner, if applicable, must, unless otherwise agreed in writing (i) devote 100% of his or her time and best efforts solely to the operation of your Dog Haus Restaurant; (ii) meet our educational, experience, financial and other reasonable criteria for the position, as contained in the Manuals or otherwise in writing; (iii) be an owner with 10% or more (direct or indirect) of your equity and voting rights, and (iv) be approved by us.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 61–62)
What This Means (2025 FDD)
According to Dog Haus's 2025 Franchise Disclosure Document, the requirement that the Principal Owner have at least a 10% interest in the equity and voting rights of the franchise can be waived under certain circumstances. The standard requirement is that the Principal Owner must own at least 10% interest in the equity and voting rights when the Franchise Agreement is signed, unless the franchisee is a publicly held entity or a wholly-owned subsidiary of a publicly-held entity.
This waiver provides flexibility for potential Dog Haus franchisees who may have unique ownership structures or circumstances. It is important to note that the FDD does not specify what these 'certain circumstances' are, so a prospective franchisee should seek clarification from Dog Haus on what conditions would warrant a waiver of this requirement.
It is also important to remember that even if the 10% ownership requirement is waived, the Principal Owner must still be acceptable to Dog Haus and be responsible for the operational decisions of the Franchised Restaurant, devoting their full time to the business. This ensures that regardless of equity, the Principal Owner is committed to managing the Dog Haus franchise effectively.