Must the Operating Principal have direct, day-to-day, full-time supervision of the Red Wagon Club Business?
Red_Wagon_Club Franchise · 2024 FDDAnswer from 2024 FDD Document
Ownership of an RWC Business is not a passive investment. You must identify one of your owners who is a natural person with at least a 51% ownership interest and voting power in you, with the authority to take legally binding actions on your behalf, to act as your "Operating Principal." We must approve the Operating Principal prior to such individual having any involvement in your RWC Business. If your Operating Principal ceases to own at least a 51% ownership interest and voting interest in you, your Operating Principal resigns or otherwise indicates to us or to you that he or she wishes to cease acting as Operating Principal, or we disapprove of your Operating Principal, you must recruit a new Operating Principal within 30 days of the change in ownership or disapproval and submit to us all documents we request regarding the new Operating Principal for our review and approval. Your Operating Principal must, at all times, have direct, day-to-day, full-time supervision of your RWC Business. Your Operating Principal must attend all scheduled meetings and required trainings conducted by us for the purpose of further instruction, education, or informing you on topics involving the supervision of your RWC Business.
If your Operating Principal does not wish to supervise your RWC Business on a full-time basis, you must appoint a manager who has completed the Training Programs to work full-time to supervise the operation of your RWC Business (the "Designated Manager"). We may establish minimum qualifications for any such Designated Manager, which may include completion of training programs, confirmation that they will have no competitive business activities, and/or execution of a non-disclosure agreement or other covenants we require. If any Designated Manager ceases to act as your RWC Business's Designated Manager, your Operating Partner must manage your RWC Business until such time as a replacement Designated Manager has satisfactorily completed the training programs and meets our then-current minimum qualifications. The Designated Manager does not need to own an equity ownership in you.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISED BUSINESS (FDD page 37)
What This Means (2024 FDD)
According to Red Wagon Club's 2024 Franchise Disclosure Document, the Operating Principal is required to have direct, day-to-day, full-time supervision of the Red Wagon Club Business. The Operating Principal must be one of the owners, be a natural person, have at least a 51% ownership interest and voting power, and have the authority to take legally binding actions. The franchisor, Red Wagon Club, must approve the Operating Principal before they have any involvement with the business.
If the Operating Principal ceases to meet the ownership requirements, resigns, or is disapproved by Red Wagon Club, the franchisee has 30 days to recruit a new Operating Principal. This new principal must then be submitted to Red Wagon Club for review and approval. The Operating Principal is also required to attend all scheduled meetings and required trainings conducted by Red Wagon Club.
However, if the Operating Principal does not wish to supervise the Red Wagon Club Business on a full-time basis, the franchisee can appoint a Designated Manager. This Designated Manager must have completed the Training Programs to work full-time and supervise the operation. Red Wagon Club may establish minimum qualifications for the Designated Manager, including training programs, confirmation of no competitive business activities, and execution of a non-disclosure agreement. If the Designated Manager leaves, the Operating Partner must manage the business until a replacement Designated Manager is found and trained.