If Cinnabon terminates the franchise agreement, how long does the franchisee have to pay the liquidated damages?
Cinnabon Franchise · 2025 FDDAnswer from 2025 FDD Document
You will pay all amounts stated in this Section 18.3 within 30 days after the termination of this Agreement.
You agree, and you direct any party construing this Agreement to conclusively presume, that the damages stated in this Section 18.3: (i) are true liquidated damages; (ii) are intended to compensate us for the harm we will suffer; (iii) are not a penalty; (iv) are a reasonable estimate of our probable loss resulting from your defaults, viewed as of the termination date; and (v) will be in addition to all other rights we have to obtain legal or equitable relief.
We have the right to set off any credits, balances or amounts we owe to you against the amounts you owe under this Section 18.3.
Source: Item 23 — Receipts (FDD pages 114–399)
What This Means (2025 FDD)
According to Cinnabon's 2025 Franchise Disclosure Document, if the franchise agreement is terminated, the franchisee is required to pay all liquidated damages within 30 days of the termination date. This payment is intended to compensate Cinnabon for the harm suffered due to the early termination and is considered a reasonable estimate of probable loss, not a penalty. Cinnabon retains the right to offset any credits or amounts owed to the franchisee against these liquidated damages.
This means a prospective Cinnabon franchisee needs to be aware that termination of the agreement can result in a significant financial obligation that must be settled promptly. The amount of these damages is calculated based on royalty fees or proprietary goods purchases, depending on the specific agreement, and can cover a period up to 36 months.
It is important for franchisees to understand the conditions under which Cinnabon can terminate the agreement, as outlined in Section 17, to avoid potential default and subsequent financial penalties. Franchisees should also be aware of their rights and obligations regarding termination, particularly in states like Minnesota and Illinois, where specific laws may affect the termination process and the enforceability of liquidated damages clauses.