Under what conditions can Cinnaholic require owners to personally guarantee obligations?

According to Cinnaholic's 2025 Franchise Disclosure Document, Cinnaholic may require owners holding at least a 10% equity interest in the franchise to personally guarantee the franchisee's obligations. This guarantee would cover obligations under both the Development Agreement and the Franchise Agreement. The specific form of these guarantees is detailed in the Guaranty Agreement, which is included as Exhibit E to the Development Agreement and Exhibit F to the Franchise Agreement.

This requirement means that if the Cinnaholic franchise, as a business entity, fails to meet its financial or contractual obligations to Cinnaholic, the individuals who have provided a personal guarantee can be held personally liable for those debts or obligations. This is a significant risk for franchisees, as their personal assets could be at stake if the business encounters financial difficulties.

Personal guarantees are a common practice in franchising, especially for new or smaller franchise systems. They provide the franchisor with an additional layer of security, ensuring that there is recourse beyond the business assets of the franchisee. However, prospective Cinnaholic franchisees should carefully review the Guaranty Agreements (Exhibits E and F) and understand the full extent of their personal liability before signing the Franchise Agreement or Development Agreement. It is advisable to seek legal counsel to fully understand the implications of providing a personal guarantee.