How is the loan guaranteed in section (c) of the Capriottis Sandwich Shop FDD?
Capriottis_Sandwich_Shop Franchise · 2025 FDDAnswer from 2025 FDD Document
the trailing 12 months' EBITDA of the borrower or 120% of the cost of the original investment used to build or acquire the store owned by the borrowe
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 73)
What This Means (2025 FDD)
According to the 2025 Capriottis Sandwich Shop FDD, certain loans are guaranteed by shares of company stock. Specifically, the loan is guaranteed with up to 228,000 of newly issued shares of voting stock in Capriotti's Sandwich Shop, Inc., with each share valued at $1.25. This means that in the event of a default on the loan, the lender has a claim on these shares as a form of security.
For a prospective franchisee, this information is relevant because it provides insight into how Capriottis Sandwich Shop manages its financing and what assets are used to secure loans. Understanding the company's financial structure can help a franchisee assess the overall financial health and stability of the franchisor. Knowing that loans are backed by company stock offers a degree of transparency into the company's risk management practices.
However, it's important to note that the value of the stock can fluctuate, and the actual value realized by the lender in the event of default may be different from the stated value of $1.25 per share. Additionally, the guarantee is limited to a specific number of shares, so the extent of the guarantee depends on the outstanding loan amount and the terms of the agreement. Franchisees should consider these factors when evaluating the financial stability of Capriottis Sandwich Shop.