If Cinnabon terminates the franchise agreement, can Cinnabon require the franchisee to assign their interest in the lease for the Accepted Location?
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 the franchisee's default, Cinnabon has the option to require the franchisee to assign their interest in the lease for the Accepted Location to Cinnabon or another franchisee designated by Cinnabon. The franchisee must then promptly and completely vacate the Franchised Business, providing all necessary assistance to enable Cinnabon or its designated franchisee to take possession. This clause ensures that Cinnabon can maintain control over the location of the franchise, which is crucial for brand consistency and operational continuity.
Furthermore, if the franchisee or one of their affiliates owns the Accepted Location, Cinnabon has the option to purchase or lease the location. The lease would be for an initial five-year term with an option to renew for another five years, based on commercially reasonable terms. If Cinnabon and the franchisee cannot agree on a purchase price within a reasonable timeframe, the price will be determined by three independent appraisers using an Appraisal Process. Cinnabon can also offset any amounts owed by the franchisee or their affiliates against payments for the purchase of the location.
These provisions in the Franchise Agreement allow Cinnabon to protect its interests in the event of termination, ensuring that it can either take over the location or transfer it to another franchisee. This is a common practice in franchising, as the location is often a significant factor in the success of the business. Prospective franchisees should carefully consider these terms and understand the potential implications if Cinnabon terminates the agreement.