If Cinnabon terminates the franchise agreement, is the franchisee required to assign their interest in the Lease for the Accepted Location to Cinnabon or another franchisee?
Cinnabon Franchise · 2025 FDDAnswer from 2025 FDD Document
If we terminate this Agreement under Section 17 (Default and Termination), you will, at our option, assign to us, or another franchisee we designate, your interest in any Lease for the Accepted Location, and will vacate the Franchised Business promptly and completely, rendering all necessary assistance to us or the other franchisee to enable it to take prompt possession.
If you or one of your affiliates owns the Accepted Location, we may elect to purchase the Accepted Location or, at our option, lease the Accepted Location from you or that affiliate for an initial five-year term with one renewal term of five years (at our option) on commercially reasonable terms.
If you and we cannot agree on a
purchase price for the Accepted Location in a reasonable time, the purchase price will be determined by three independent appraisers using the Appraisal Process. If we elect to exercise this option to purchase, we may set off all amounts you owe us or our affiliates under this Agreement against any payments for the purchase. You (and your Owners) agree to cause your affiliate to comply with these requirements.
Source: Item 23 — Receipts (FDD pages 114–399)
What This Means (2025 FDD)
According to the 2025 Cinnabon Franchise Disclosure Document, if Cinnabon terminates the franchise agreement due to franchisee default, the franchisee is required to assign their interest in the lease for the accepted location to Cinnabon or another franchisee that Cinnabon designates. The franchisee must also vacate the franchised business promptly and completely and provide all necessary assistance to enable Cinnabon or the other franchisee to take possession.
Additionally, if the franchisee or one of their affiliates owns the accepted location, Cinnabon has the option to purchase or lease the location. The initial lease term would be for five years, with Cinnabon having the option to renew for another five years, based on commercially reasonable terms. If Cinnabon elects to purchase the location, they can offset any amounts owed by the franchisee or their affiliates against the purchase payments.
This clause is significant for prospective franchisees as it outlines the obligations upon termination due to default, potentially leading to a loss of the business location. Franchisees should carefully consider the implications of this clause and ensure they understand the conditions under which Cinnabon can terminate the agreement and exercise its rights to acquire or lease the location. It is also important to note that the purchase price of the location, if an agreement cannot be made, will be determined by three independent appraisers.