For Cinnabon franchises sold in Indiana, what geographical limitation is placed on the post-term covenant not to compete, as it revises Section 15.4.B of the Franchise Agreement?
Cinnabon Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 23: Receipts]
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- The laws of the State of Indiana supersede any provisions of the Franchise Agreement, or Georgia law if these provisions are in conflict with Indiana law. The Franchise Agreement will be governed by Indiana law, rather than Georgia law as stated in Section 22.5 (Applicable Law) of the Franchise Agreement.
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- Venue for litigation will not be limited to Georgia, as specified in Section 19.1 (Dispute Resolution) of the Franchise Agreement.
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- The prohibition by Indiana Code 23-2-2.7-1(7) against unilateral termination of the franchise without good cause or in bad faith, good cause being defined therein as "a material breach of the franchise agreement," will supersede the provisions of Section 17 (Default and Termination) of the Franchise Agreement in the State of Indiana to the extent they may be inconsistent with this prohibition.
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- No release language stated in the Franchise Agreement will relieve us or any other person, directly or indirectly, from liability imposed by the laws on franchising of the State of Indiana.
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- Section 15.4.B. (Post-Term) of the Franchise Agreement is revised to limit the geographical extent of the post-term covenant not to compete to an area of reasonable size for all franchises sold in the State of Indiana.
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- Section 15.5 (Remedies) of the Franchise Agreement will not apply to franchises offered and sold in the State of Indiana.
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- Notwithstanding the terms of Section 4 (Territorial Rights) of the Franchise Agreement, we will not compete unfairly with you within a reasonable area.
INDIANA ADDENDUM TO PERSONAL COVENANTS AGREEMENT
Notwithstanding anything to the contrary stated in the Personal Covenants Agreement, the following provisions will supersede and apply:
- The Personal Covenants Agreement is revised to limit the geographical extent of the covenant not to compete to an area of reasonable size for all franchises sold in the State of Indiana.
Source: Item 23 — Receipts (FDD pages 114–399)
What This Means (2025 FDD)
According to the 2025 Cinnabon Franchise Disclosure Document, the Indiana Addendum modifies the standard franchise agreement for franchises sold in Indiana regarding post-term restrictive covenants. Specifically, Section 15.4.B of the Franchise Agreement, concerning post-term covenants not to compete, is revised. This revision limits the geographical extent of the non-compete agreement to an area of "reasonable size" for all Cinnabon franchises sold in Indiana.
This means that if a Cinnabon franchisee in Indiana leaves the system, they are restricted from operating a competing business, but only within a geographical area deemed reasonable. The term "reasonable size" is not explicitly defined in the FDD, which introduces some ambiguity. What constitutes a reasonable area could depend on factors such as population density, market conditions, and the proximity of other Cinnabon locations.
For a prospective Cinnabon franchisee in Indiana, this modification offers some protection against overly broad non-compete restrictions. However, it's important to understand what Cinnabon considers a "reasonable size" in practice. A potential franchisee should seek clarification from Cinnabon regarding specific examples or guidelines used to determine the geographical scope of the post-term non-compete in Indiana. They may also want to consult with a legal professional to assess the enforceability and implications of this clause under Indiana law.
Additionally, the Indiana Addendum to the Personal Covenants Agreement also includes a similar revision, limiting the geographical extent of the covenant not to compete to an area of reasonable size for all franchises sold in Indiana. This suggests that not only the franchisee but also individuals with an equity interest in the franchise are subject to a non-compete agreement of reasonable size.