Equity Accounting & 409A Valuation Operations4 min readUpdated September 2026

Pulley vs. Carta When Your Franchise Units Are Separate LLCs

Bringing a general manager in as a partner on two locations sounds simple until the franchise agreement's transfer clause shows up and you realize each unit is held in its own limited liability company. The franchisor has to approve the ownership change, the two units need separate records, and the tool question, Pulley or Carta, actually comes second.

Work through the entity structure and the franchisor's approval process before you pick a platform. Getting the order backward is how operators end up promising equity that a signed franchise agreement doesn't actually let them grant yet.

Vendors Covered in this Article

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Check the entity type before comparing either platform

Pulley and Carta are both built mainly for companies that issue stock and options and need a 409A valuation to set strike prices, though both also support other entity types, so confirm fit for your structure. Many multi-unit franchise operators run each location, or a small cluster of them, as its own LLC taxed as a partnership, and a partnership doesn't issue stock options at all. A general manager buying into two locations more often receives a profits interest, a partnership concept with its own tax rules, not shares from either platform's cap table.

If your operating entities are LLCs, ask a specific question before evaluating either tool: does it actually model profits interests and partnership capital accounts, or does it only track shares and options? If it's the latter, your CPA's partnership accounting needs to sit alongside whichever platform you choose, not get replaced by it.

Why the franchisor's transfer clause changes your timeline

Franchise agreements routinely require the operator to notify the franchisor, and get written consent, before any change in ownership of the entity holding the unit, including a minority stake issued to a new partner. Some agreements also give the franchisor a right of first refusal on the transfer. Skipping this step doesn't make the grant invalid immediately, but it puts the operator in breach of the agreement the day it happens.

Get the franchisor's written approval before you finalize the general manager's buy-in, not after, and structure the offer as contingent on that approval so nobody is promised something the franchise agreement doesn't yet allow. Keep that approval letter with the entity's ownership records; it's exactly what a future buyer or lender will ask to see.

Tracking ownership separately at each unit's entity level

When a general manager buys into two specific locations rather than the whole portfolio, a rolled-up spreadsheet that blends every unit into one ownership percentage stops answering the actual question: what does this person own, and in what unit. Track each LLC's membership ledger on its own, and only summarize across units on a separate reporting layer.

This separation matters most the day one of the two units sells or gets transferred back to the franchisor and the other doesn't. A blended cap table makes that event look like a partial sale of one combined asset instead of what it actually is, a full exit from one entity and continued ownership in another.

Vesting the buy-in instead of granting full ownership on day one

A general manager who's earned the offer over several years of running a location well still benefits from a vesting schedule rather than a single grant handed over up front. Tie the vesting to time in the role, to unit-level performance such as sustained profitability, or to both, and put the schedule in the same document that goes to the franchisor for approval.

Vesting also gives the operator a clean way to unwind the arrangement if the general manager leaves early or a unit underperforms badly enough that the franchisor steps in. Say the GM leaves partway through a four-year vesting schedule: the buy-back price for the unvested portion should already be spelled out in the agreement, not negotiated in the moment when both sides are frustrated.

When Pulley fits a multi-unit franchise operator

Pulley may fit an operator running a straightforward corporate holding structure with a small number of grants who wants a simple setup for the 409A valuation a corporation needs when it does issue stock options; confirm current features and pricing with the vendor.

When Carta fits a multi-unit franchise operator

Carta may fit a larger portfolio with several corporate entities and equity holders across them, where consolidated reporting and ASC 718 expense reporting across multiple entities can save time over reconciling each one by hand; confirm current features with the vendor.

A common mistake: granting equity before the franchisor has actually signed off

The most common mistake in this situation is verbal: a founder tells a strong general manager "you're a partner now" to keep them from leaving, then works out the paperwork later. If the franchise agreement requires consent for that ownership change, the founder has made a promise the agreement doesn't yet support, and unwinding an informal promise is far harder than delaying a formal one.

Put the timeline in writing for the general manager too: what's being offered, what entity it applies to, and that it's contingent on the franchisor's approval. A short delay for a real, documented grant beats an immediate promise that has to be walked back.

Before offering a general manager a stake, work in this order:

  1. Confirm the entity type behind each unit and whether your chosen platform supports it.
  2. Read the franchise agreement's transfer and assignment sections for notice, consent, and any right of first refusal.
  3. Get the franchisor's written consent before telling anyone they are a partner.
  4. Track each unit LLC's membership ledger on its own, and summarize across units in a separate reporting view.
  5. Vest the buy-in over time, unit-level performance, or both, and put the schedule in writing.
Executive Capability Standard

What Good Looks Like

Good equity accounting for a multi-unit franchise operator means every unit's ownership is tracked at its own entity level, no equity has been promised before the franchisor's transfer approval is in hand, and the mechanism used, profits interest or stock option, actually matches how each unit is structured.

Building The Capability (5-Stage Skill Ladder)

1. Learn:Confirm whether each unit is a corporation issuing stock or an LLC granting profits interests, since the two use different accounting.
2. Do Manually:Track each unit's ownership on its own ledger and keep the franchisor's written transfer approval with that entity's records.
3. Delegate:Have your CPA structure any profits interest grant and confirm it meets the applicable safe harbor before you finalize it.
4. Automate:Use Pulley or Carta to keep each corporate entity's cap table current as new units or partners are added.
5. Buy:Once you're running several corporate entities with real option grants, standardize on a platform that consolidates reporting across all of them.

How to Get Started

Disclosure: We may earn a commission if you buy through some links on this page. It doesn't change what we recommend.

Frequently Asked Questions

Does a minority equity grant to a general manager need franchisor approval?

Most franchise agreements require the franchisor's written consent before any change in ownership of the entity holding the unit, including a minority stake. Read the transfer and assignment sections of your specific agreement, since terms vary by franchisor.

Do LLC profits interests need a 409A valuation the way stock options do?

Not in the same way. Profits interests follow different tax rules than stock options, though the LLC still needs a defensible value at the time of grant. Have your CPA confirm the grant meets the applicable safe harbor before you finalize it.

Should each unit's ownership be tracked on one combined cap table?

Track each unit's entity separately, since blending them hides what a specific owner holds in a specific location. Summarize across units on a separate reporting view if you need a portfolio-level picture.

About the numbers

This guide doesn't quote a sourced benchmark. Figures in it are estimates or general guidance, so check them against your own numbers.

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