What are the conditions for a related party transfer of a Cinnabon franchise under FA 16.5?
Cinnabon Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provisions | Section in Franchise Agreement | Summary |
|---|---|---|
| o. You must comply with our right of first refusal. p. If you operate a Co-Branded Bakery, the Co-Branded Agreement or Co-Branded Franchise are transferred at the same time. | ||
| FA: 16.4 (non-control transfers) | a. You give us prior written notice of the transfer. b. You pay all sums owed. c. You are not in default d. Transferee meets qualifications e. Transferee signs assignment and guaranty f. You and your guarantors and owners sign a general release. g. You remain liable for pre-Transfer obligations. h.You pay us a Transfer Fee. | |
| FA: 16.5 (related party transfers) | a. You give us prior written notice of the transfer. b. You are not in default c. Transferee meets qualifications d. Transferee assumes in writing the Franchise Agreement and the guaranty. e. You may not be in default under the Franchise Agreement. f. You pay us a Transfer Fee. g. You and your guarantors and owners must sign a general release and remain liable for pre-Transfer obligations |
Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 93–100)
What This Means (2025 FDD)
According to Cinnabon's 2025 Franchise Disclosure Document, specifically Item 17, there are several conditions that a franchisee must meet to transfer their franchise to a related party, as outlined in Franchise Agreement (FA) 16.5. These conditions ensure that the transfer process is conducted properly and that the new franchisee is qualified to operate the Cinnabon business.
First, the franchisee must provide Cinnabon with prior written notice of the transfer. Second, the franchisee must not be in default under the Franchise Agreement. Third, the related party transferee must meet Cinnabon's qualifications for franchisees. Fourth, the transferee must assume the Franchise Agreement and the guaranty in writing. Fifth, the franchisee may not be in default under the Franchise Agreement. Sixth, the franchisee must pay Cinnabon a transfer fee. Finally, both the franchisee and their guarantors and owners must sign a general release and remain liable for pre-transfer obligations.
These conditions are typical in franchise agreements to protect the brand and ensure the continued success of the franchise system. By requiring prior notice, Cinnabon can properly vet the related party and ensure they meet the necessary qualifications. Preventing transfers when the franchisee is in default protects Cinnabon from further financial or operational issues. The transfer fee compensates Cinnabon for the administrative costs associated with the transfer and the potential impact on the franchise system. The general release and continued liability for pre-transfer obligations ensure that Cinnabon is protected from any past issues related to the franchise.
Prospective Cinnabon franchisees should carefully review these conditions and understand the implications before entering into a franchise agreement. It is important to note that these conditions apply specifically to related party transfers and may differ from the conditions for other types of transfers. Franchisees should also be aware of the transfer fee amount, as this can be a significant cost associated with the transfer process.