What right does Cinnabon have if a franchisee defaults under the Lease or the Franchise Agreement?
Cinnabon Franchise · 2025 FDDAnswer from 2025 FDD Document
eration of the Franchised Business, provide for orderly change of management and disposition of personal property, and otherwise protect our interests. If we exercise this right, you will vacate the Franchised Business promptly and completely, rendering all necessary assistance to us to enable us to take prompt possession, and you will have no right to any revenue that we earn while operating the Franchised Business. If you dispute the validity of our termination of this Agreement, we will nevertheless have the option, which you irrevocably grant, to operate the Franchised Business pending the final, unappealed determination of the dispute under this Agreement. If an arbitrator or court of competent jurisdiction makes a final, unappealed determination that the termination was not valid, we will make a full and complete accounting for the period during which we operated the Franchised Business.
- B. Right to Acquire Accepted Location. 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.
C. Right to Acquire Property. If we exercise our option to acquire rights to your Accepted Location, within 15 days after our notice to you of this election, you will arrange with us for an inventory to be made by us, at our cost, of all Goods related to the Franchised Business, including all items bearing the Marks. We will have the option, to be exercised within 30 days after our completion of the final inventory, or our receipt thereof, to purchase from you any or all of these items at the actual fair market value (exclusive of goodwill) (the "Purchase Value").
Source: Item 23 — Receipts (FDD pages 114–399)
What This Means (2025 FDD)
According to the 2025 Cinnabon Franchise Disclosure Document, if a franchisee defaults under the Franchise Agreement, Cinnabon has several rights. Cinnabon can terminate the agreement, and at its option, require the franchisee to assign their interest in the lease for the location to Cinnabon or another designated franchisee. The franchisee must then vacate the premises and assist in the transfer of possession.
If the franchisee or an affiliate owns the location, Cinnabon can choose to purchase or lease it. 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, independent appraisers will determine the price using an appraisal process. Cinnabon can also offset any amounts owed by the franchisee against payments for the purchase of the location.
Additionally, Cinnabon requires that all leases include provisions that protect its interests. These include the right to receive copies of any default notices sent to the franchisee, the right to cure any defaults under the lease (within 15 days for monetary defaults and 30 days for non-monetary defaults), and the right to enter and operate the business at the location upon termination or default. Cinnabon also has the right to remove proprietary products and materials bearing its trademarks upon the lease's expiration or termination. These terms ensure Cinnabon can maintain control over the location and brand even if a franchisee defaults.