Under what circumstances does Cinnabon have the option to purchase my business?
Cinnabon Franchise · 2025 FDDAnswer from 2025 FDD Document
| n. Our right of first refusal to acquire your business | FA: 16.8 | We can match any offer for your Bakery or substantially all interest in your entity. | | o. Our option to | FA: 18.4 | We may purchase your Goods related to the Bakery at the fair | | purchase your | | market value (exclusive of good will) and may purchase your | | business | | Accepted Location if you own it or your interest in any lease. | | | ES: 20.U. | Above not applicable for an Express Bakery.
Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 93–100)
What This Means (2025 FDD)
According to Cinnabon's 2025 Franchise Disclosure Document, Cinnabon has the option to purchase a franchisee's business under specific conditions. Cinnabon may purchase the franchisee's goods related to the bakery at fair market value, excluding goodwill. Additionally, Cinnabon may purchase the Accepted Location if the franchisee owns it, or the franchisee's interest in any lease. However, these options are not applicable for an Express Bakery.
This provision in the Franchise Agreement outlines Cinnabon's rights regarding the acquisition of a franchisee's business assets and location. It is important to note that the purchase of goods is based on fair market value, excluding any value attributed to the business's goodwill. This means that the franchisee will be compensated for the tangible assets but not for the brand reputation or customer loyalty built over time.
For prospective franchisees, this clause has significant implications. If Cinnabon exercises its option to purchase the business, the franchisee may be required to sell their inventory and potentially their location to the franchisor. Understanding the valuation methods and terms of such a purchase is crucial. Franchisees should seek clarification on how the fair market value of goods and lease interests will be determined to ensure they receive equitable compensation.
It is also important to note the exclusion for Express Bakeries, indicating that different terms may apply to these smaller format locations. Franchisees should carefully review the specific agreements applicable to their chosen franchise type to fully understand their rights and obligations regarding potential business acquisition by Cinnabon.