Are the notes payable to stockholders for Capriottis Sandwich Shop collateralized?

According to Capriottis Sandwich Shop's 2025 Franchise Disclosure Document, the notes payable to stockholders are collateralized by the company's assets. Specifically, there are two instances of notes payable to stockholders listed. One is for $953,827 with interest rates ranging from 7.00% to 10%, due through January 2026, and the other is for $2,500,000 with interest rates ranging from 8.00% to 12.00%, due through February 2026. Both of these notes are collateralized by the company's assets.

This means that Capriottis Sandwich Shop has pledged its assets as security for these loans from stockholders. If Capriottis Sandwich Shop defaults on these notes, the stockholders have a legal claim on the company's assets to recover their investment. This arrangement reduces the risk for the stockholders providing the loans, as they have a secured interest in the company's assets.

For a prospective franchisee, this information indicates that Capriottis Sandwich Shop has relied on stockholder loans as part of its financing strategy. Understanding the extent and terms of these related-party loans, including the collateralization, can provide insights into the company's financial health and its relationships with its stockholders. It's important to consider how these obligations might impact the company's ability to support its franchisees and invest in the brand's growth.