What minimum equity interest in the franchisee requires an owner to personally guarantee obligations to Cinnaholic?

According to Cinnaholic's 2025 Franchise Disclosure Document, any owner holding at least a 10% equity interest in the franchisee may be required to personally guarantee the franchisee's obligations to Cinnaholic under both the Development Agreement and the Franchise Agreement. These guarantees would be formalized through a Guaranty Agreement, which is included as an exhibit to both the Development Agreement and the Franchise Agreement.

This requirement means that if a franchisee entity (like an LLC or corporation) defaults on its financial or contractual obligations to Cinnaholic, the individuals who have guaranteed the obligations can be held personally liable. This is a significant consideration for potential franchisees, as it puts their personal assets at risk. The 10% equity threshold ensures that individuals with a substantial stake in the business are committed to its success and are willing to back it with their personal guarantee.

Franchisors often require personal guarantees to ensure that franchisees are fully invested in the success of the business and to provide an additional layer of security for the franchisor. The specific percentage that triggers the guarantee can vary among franchise systems, but a 10% threshold is a fairly common practice. Prospective Cinnaholic franchisees should carefully review the Guaranty Agreement to understand the full extent of their obligations and potential liabilities.