Under what condition are Bound Parties NOT prohibited from owning securities in a Competitive Business for Cinnaholic?

According to Cinnaholic's 2025 Franchise Disclosure Document, neither the franchisee nor other Bound Parties are prohibited from owning securities in a Competitive Business under specific conditions. This exception applies if the securities are listed on a stock exchange or traded on the over-the-counter market. Furthermore, the ownership must represent 5% or less of the total number of shares of that class of securities that have been issued and are currently outstanding.

This provision provides a limited allowance for franchisees and related parties to invest in publicly traded competitors without violating the non-compete agreement. The 5% threshold is designed to prevent franchisees from exerting significant influence over a competing business while still allowing for minor investment opportunities. This clause balances Cinnaholic's need to protect its business interests with the franchisee's ability to manage their personal investments.

For a prospective Cinnaholic franchisee, this means they can invest in a publicly traded competitor, but they must ensure their holdings remain below the 5% threshold. Exceeding this limit would be a breach of the franchise agreement's restrictive covenants. Franchisees should carefully monitor their investments and consult with legal counsel if they are unsure about compliance with this provision.