For Carvel, what is the purpose of the cash collections and cash reserves held by the Trustee?

According to Carvel's 2025 Franchise Disclosure Document, certain cash and money market mutual fund accounts are established in the name of a financial institution, referred to as the "Trustee." These accounts are for the benefit of the Trustee and the holders of Senior Notes. The funds held within these accounts are restricted in their use.

The restricted cash held by the Trustee serves a specific purpose: to be used for payments of principal, interest, and commitment fees required for Carvel's notes. Additionally, the restricted cash may include any other cash collections related to securitized franchising or licensing activities held in special-purpose, bankruptcy-remote subsidiaries.

For a prospective Carvel franchisee, this indicates that a portion of the revenue generated through franchising and licensing activities is earmarked to cover debt obligations. This arrangement provides security to the holders of the Senior Notes, ensuring that Carvel meets its financial commitments. It also highlights the financial structure and obligations of the Carvel franchisor, which franchisees should be aware of as it could impact the franchisor's ability to support the franchise system.