What were the balances due to a related party by Cinnaholic as of December 31, 2024?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
$32,921, respectively. Future minimum lease payments under the lease total $37,210, of which $31,858 is due during the year ending December 31, 2022, and $5,352 is due during the year ending December 31, 2023. Starting from March 2023, the minimum rent is $2,757 monthly.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 61)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, the balance due to a related party as of December 31, 2024, was $520,959. This is an increase from the $377,838 due on December 31, 2023. These advances from related parties or companies with common ownership bear no interest and are payable upon demand.
For a prospective franchisee, this indicates that Cinnaholic has relied on related-party transactions for financing. The fact that these advances are payable upon demand could represent a risk, as the franchisor might need to repay a significant amount of money on short notice.
It is important to note that related party transactions are not inherently bad, but they require careful scrutiny to ensure they are conducted at arm's length and are fair to all parties involved, including franchisees. A potential franchisee should seek clarification from Cinnaholic regarding the nature of these related party transactions, the specific terms of repayment, and the potential impact on the franchisor's financial stability.