If a Cinnabon franchisee understates Net Sales by more than 2%, what additional financial obligation is triggered?
Cinnabon Franchise · 2025 FDDAnswer from 2025 FDD Document
ssist in accomplishing payment by the method that we specify within 30 days of our notice to you. If there are insufficient funds in your account to cover our draft, we will charge you a fee that will not exceed 110% of our or our affiliates' actual costs and expenses related to the incident (including any bank return fees or other charges). The written authorizations and documents that you must sign as provided under this Section may give us the right to initiate debit entries and/or credit corrections entries. We may make bank drafts based on the reports required under Section 14 (Right to Access; Records; Reporting), the data of the point-of-sale system and other equipment provided for in Section 12.8 (Computer System), the results of an audit, or the payment obligations specified in this Agreement or any other agreement between you and us or our affiliates. If you fail to report the Net Sales of the Franchised Business to us for any reporting period as required in this Agreement, we have the right to make bank transfers or drafts for Royalty Fees and Advertising Contributions based on our reasonable estimate of the amounts for the Franchised Busine
Source: Item 23 — Receipts (FDD pages 114–399)
What This Means (2025 FDD)
Based on the 2025 Cinnabon Franchise Disclosure Document, if a franchisee fails to report Net Sales as required, Cinnabon has the right to make bank transfers or drafts for Royalty Fees and Advertising Contributions based on their reasonable estimate of the amounts for the Franchised Business and/or the data of the point-of-sale system. This means Cinnabon can estimate the missing sales and collect fees accordingly.
Additionally, if a Cinnabon franchisee fails to submit timely, complete, and accurate reports, financial statements, tax returns, and statements of initial investment costs, Cinnabon may charge a late fee. The current late fee is $50 per week that the report, statement, or return is late. Cinnabon can increase this late reporting fee each calendar year, but the FDD does not specify a limit to the increase.
Furthermore, the franchisee must pay interest on amounts not paid on time at a rate of 1.5% per month or portion of a month, but not more than the maximum interest rate permitted by applicable laws. This interest charge applies to any underpaid amounts resulting from the understatement of Net Sales. These measures ensure Cinnabon receives accurate financial reporting and timely payments from its franchisees.