If a Cinnabon franchisee is an entity, can a transfer of ownership interests in the entity's owners be considered a Control Transfer?
Cinnabon Franchise · 2025 FDDAnswer from 2025 FDD Document
16.1 Definition of Transfer. For purposes of this Agreement, "Transfer" as a verb means to sell, assign, give away, transfer, pledge, mortgage, or encumber, either voluntarily or by operation of law (such as through divorce or bankruptcy proceedings), any interest in this Agreement, the Franchised Business, substantially all the assets of the Franchised Business, or in the ownership of the franchisee (if you are an Entity). "Transfer" as a noun means any such sale, assignment, gift, transfer, pledge, mortgage, or encumbrance. A "Control Transfer" means any Transfer of (i) this Agreement or any interest in this Agreement; (ii) the Franchised Business or all or substantially all of the Franchised Business's assets; or (iii) any Controlling Interest (defined below) in you (if you are an Entity), whether directly or indirectly through a transfer of legal or beneficial ownership interests in any Owner that is an Entity, and whether in one transaction or a series of related transactions, regardless of the time period over which these transactions take place. References to a "Controlling Interest" in you mean either (i) 20% or more of the direct or indirect legal or beneficial ownership interests in your Entity or (ii) the acquisition of an ownership interest or other right or interest which grants the power (whether directly or indirectly) to direct or
cause the direction of management and polices of you or the Franchised Business to any individual or Entity, or group of individuals or Entities, that did not have that power before that acquisition.
Source: Item 23 — Receipts (FDD pages 114–399)
What This Means (2025 FDD)
According to Cinnabon's 2025 Franchise Disclosure Document, if a franchisee is an entity, a transfer of ownership interests in the entity's owners can indeed be considered a "Control Transfer." A "Control Transfer" includes the transfer of the franchise agreement itself, the franchised business assets, or any "Controlling Interest" in the franchisee entity. A "Controlling Interest" is defined as either 20% or more of the direct or indirect legal or beneficial ownership interests in the franchisee entity or the acquisition of an ownership interest that grants the power to direct the management and policies of the franchisee or the franchised business. This applies whether the transfer occurs in a single transaction or a series of related transactions, regardless of the time period.
This definition has significant implications for Cinnabon franchisees who operate as entities. Any transfer of ownership interests that meets the criteria for a "Control Transfer" requires the franchisor's prior written consent. Cinnabon emphasizes that the franchise license is granted based on the business skill, financial capacity, and personal character of the franchisee and its owners. Therefore, any change in control is subject to their approval.
To initiate a Control Transfer, the franchisee must provide written notice to Cinnabon at least 90 days before the proposed transfer and furnish all requested information at least 60 days prior. Cinnabon has the sole and absolute discretion to withhold consent for a Control Transfer, and specific conditions must be met unless waived by Cinnabon. These conditions include ensuring all outstanding payments to Cinnabon and its affiliates are settled, the franchisee is not in default of any agreements, and the transferee meets the requirements for new franchisees, including satisfactory completion of the Management Training Program.
Furthermore, the franchisee and its owners must remain liable for all obligations arising before the transfer, and the landlord must agree to transfer the Site Agreement to the new transferee. Cinnabon also retains the right to assess a lease renewal fee if the lease is renewed or extended as a condition of the transfer. Given these stipulations, prospective Cinnabon franchisees should carefully consider the implications of ownership transfers and ensure they understand the franchisor's requirements and approval processes.