Does the Operator of a Nothing Bundt Cakes franchise need to have an equity interest in the Bakery?
Nothing_Bundt_Cakes Franchise · 2025 FDDAnswer from 2025 FDD Document
To maintain your rights under this Rider, you (and/or Approved Affiliates) must, by the deadlines specified in the Schedule, sign franchise agreements and leases for, and then construct, develop, and have open and operating within the Development Area, the agreedupon minimum number of Nothing Bundt Cakes® Bakeries. If your owners establish a new legal entity to operate one or more of the Nothing Bundt Cakes® Bakeries to be developed pursuant to this Rider and that new legal entity's ownership is completely identical to your ownership, that legal entity automatically will be considered an "Approved Affiliate" without further action. However, if the new legal entity's ownership is not completely identical to your ownership, you first must seek our approval for that new entity to develop and operate the proposed Bakery as an Approved Affiliate. We may refuse any such request if you and/or your owners do not (a) own and control at least eighty percent (80%) of the new entity's ownership interests and (b) have the authority to exercise voting and management control of the Bakery proposed to be owned by the new entity.
Source: Item 23 — RECEIPTS (FDD pages 93–309)
What This Means (2025 FDD)
According to Nothing Bundt Cakes' 2025 Franchise Disclosure Document, if a franchisee establishes a new legal entity to operate one or more Nothing Bundt Cakes bakeries, and the ownership of that new entity is not completely identical to the franchisee's ownership, the franchisee must seek approval from Nothing Bundt Cakes for the new entity to operate as an Approved Affiliate. Nothing Bundt Cakes may refuse this request if the franchisee and/or their owners do not own and control at least 80% of the new entity's ownership interests and have the authority to exercise voting and management control of the bakery. This condition applies when a franchisee is developing multiple locations under a development rider.
In simpler terms, if you, as a Nothing Bundt Cakes franchisee, want to create a separate company to run one or more of your bakeries, and the ownership structure of that company is different from your own, you need Nothing Bundt Cakes' permission. To get their approval, you and your owners must maintain significant ownership (at least 80%) and control over the new company.
This requirement ensures that Nothing Bundt Cakes maintains a degree of control over who operates their franchised locations, even if the franchisee chooses to operate through a separate legal entity. It protects the brand by ensuring that those in control of the bakery have a vested interest (at least 80% ownership) and the authority to manage it according to Nothing Bundt Cakes' standards. This is a fairly common practice in franchising, as franchisors want to ensure consistent brand standards and operational control across all locations.
For a prospective franchisee, this means that if you plan to use a separate legal entity with a different ownership structure to operate your Nothing Bundt Cakes bakery, you need to be prepared to maintain a controlling interest in that entity. Failure to do so could result in Nothing Bundt Cakes denying the arrangement.