What constitutes a Franchisee Default under the Cinnabon agreement related to Service Fees?
Cinnabon Franchise · 2025 FDDAnswer from 2025 FDD Document
Each of the following shall constitute a default under this Agreement, if not cured within ten (10) days following Franchisee's receipt of a written notice of such default (each a "Franchisee Default"): (i) Franchisee fails to pay, when due, any Service Fees; (ii) Franchisee fails to perform its obligations under this Agreement or defaults under any other agreement with Company, Franchisor, and/or each of their respective affiliates, or (ii) Franchisee fails to satisfy and maintain the Minimum Specifications and other pre-requisites for Support Services under this Agreement.
Source: Item 23 — Receipts (FDD pages 114–399)
What This Means (2025 FDD)
According to the 2025 Cinnabon Franchise Disclosure Document, a franchisee default occurs if the franchisee fails to pay any Service Fees when due. The franchisee has a 10-day cure period after receiving written notice of the default to rectify the situation. Service Fees consist of Comprehensive Support Fees and Billable Support Fees, which are payments for support services provided by Cinnabon.
In practical terms, this means a Cinnabon franchisee must ensure timely payment of all invoiced Service Fees to avoid being in default. Failure to pay within the specified timeframe, even after receiving a written notice and a 10-day opportunity to correct the issue, can trigger the default clause in the franchise agreement.
Cinnabon also charges interest on past due amounts at a rate of 1.5% per month, or the maximum interest rate permitted by applicable law, in addition to any administrative fees to cover the cost of addressing the nonpayment. Franchisees are responsible for maintaining sufficient funds in their designated bank accounts to cover all Comprehensive Support Fees. This highlights the importance of diligent financial management to avoid defaults and associated penalties.
Prospective Cinnabon franchisees should be aware of these financial obligations and ensure they have a system in place to manage and pay Service Fees promptly. Understanding the default terms and the potential consequences of non-payment is crucial for maintaining a healthy franchisor-franchisee relationship and avoiding disruptions to the support services provided by Cinnabon.