How does Cinnaholic apply payments made by the franchisee if there is past due indebtedness?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
- 5.5. Application of Payments. Notwithstanding designation by Franchisee to the contrary, all payments made by Franchisee hereunder will be applied by Franchisor at its discretion to any of Franchisee's past due indebtedness.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, payments made by a franchisee will be applied to any past due indebtedness at Cinnaholic's discretion, regardless of any specific designation made by the franchisee. This means that if a Cinnaholic franchisee has outstanding debts, any subsequent payments they make can be used to offset those debts first, before being applied to current fees or other obligations.
This policy benefits Cinnaholic by allowing them to prioritize the collection of overdue amounts. However, this could pose a challenge for franchisees who may want their payments to cover specific current expenses, such as royalty fees or advertising fees. If past debts exist, the franchisee might find themselves still owing current fees, potentially leading to late payment penalties or other repercussions.
Franchisees need to be aware of this application of payments, as it could impact their cash flow management and financial standing with Cinnaholic. It is crucial to maintain good financial records and communication with Cinnaholic to avoid misunderstandings about how payments are being applied and to prevent the accumulation of past due indebtedness.