If the consideration offered to a Cinnabon franchisee is not cash, what option does Cinnabon have?
Cinnabon Franchise · 2025 FDDAnswer from 2025 FDD Document
ior written consent, which will not be unreasonably withheld. Our consent may be conditioned, in our sole discretion, on the written agreement by
the secured party that, in the event of a default by you under any agreement related to the security interest, we will have the right and option (but not the obligation) to purchase the rights of the secured party upon payment of all sums then due to the secured party. Any foreclosures or other exercise of the rights granted under that security interest are subject to all applicable terms and conditions of this Section 16. Notwithstanding the foregoing, however, you may grant, without obtaining our prior written approval, a security interest in the assets of the Franchised Business (not including this Agreement) to a lender for the sole purpose of financing your acquisition, development, and/or operation of the Franchised Business.
16.8 Right of First Refusal.
- A. Option Period. If you receive and want to accept a bona fide written offer from a third party to purchase the Franchised Business or substantially all the interests in you (collectively, the "Interest"), you must give us: (i) prompt written notice of the offer, stating the name and address of the prospective purchaser and the price and terms of the offer; and (ii) copies of all written documents and other information reasonably related to the offer provided by or to the prospective purchaser.
Source: Item 23 — Receipts (FDD pages 114–399)
What This Means (2025 FDD)
According to the 2025 Cinnabon Franchise Disclosure Document, Cinnabon has the option to substitute the equivalent cash value if a potential buyer offers consideration other than cash for a Cinnabon franchise. This clause is part of Cinnabon's right of first refusal if a franchisee receives an offer from a third party to purchase the franchised business or its interests.
If Cinnabon and the franchisee cannot agree on the cash equivalent of the non-cash consideration, the FDD outlines an appraisal process. This process involves both the franchisee and Cinnabon designating an independent appraiser, and these two appraisers then select a third. The majority determination of these three appraisers will determine the equivalent cash value, which is binding for both parties. The franchisee and Cinnabon each cover the fees for their designated appraiser, and they split the cost of the third appraiser.
This right of first refusal, along with the cash substitution option, allows Cinnabon to maintain control over who enters their franchise system. It ensures that Cinnabon can match any offer, even if it includes non-cash assets, by providing the equivalent cash value. This protects Cinnabon's interests and ensures a fair process for both the franchisor and franchisee in the event of a sale.