What authority does Cinnaholic have regarding the management of the bakery if a franchisee defaults?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
- 21.4.
Management of Bakery by Franchisor.
In addition to Franchisor's right to terminate this Agreement, and not in lieu thereof, Franchisor may enter into the Bakery and exercise complete authority with respect to the management thereof until such time as Franchisor shall determine that the default of Franchisee has been cured and that Franchisee is complying with the requirements of this Agreement.
Franchisee specifically agrees that a designated representative of Franchisor may take control and manage
the Bakery in the event of any such default.
If Franchisor assumes the management of the Bakery, Franchisee must pay Franchisor (in lieu of the Royalty Fee) a Management Fee equal to ten percent (10%) of the Bakery's Gross Sales (the "Management Fee") plus reimburse Franchisor for the full compensation paid to such representative, including the cost of all fringe benefits plus any and all expenses reasonably incurred by such representative so long as such representative shall be necessary and in any event until the default has been cured and Franchisee is complying with the terms of this Agreement.
Franchisee acknowledges that the Management Fee shall be in addition to the Advertising Fee and any other fees (except the Royalty Fee) required under this Agreement and shall be paid in accordance with the methods of payment set forth in Section 5.
If Franchisor assumes the Bakery's management, Franchisee acknowledges that Franchisor will have a duty to utilize only reasonable efforts and will not be liable to Franchisee or its owners for any debts, losses, or obligations the Bakery incurs, or to any of Franchisee's creditors for any supplies or services the Bakery purchases, while Franchisor manages it.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, Cinnaholic has the authority to manage a bakery if a franchisee defaults. Cinnaholic may enter the bakery and exercise complete authority over its management until the default is cured and the franchisee complies with the franchise agreement. This right is in addition to Cinnaholic's right to terminate the agreement.
If Cinnaholic assumes management, the franchisee must pay Cinnaholic a Management Fee equal to ten percent (10%) of the Bakery's Gross Sales, replacing the Royalty Fee. The franchisee must also reimburse Cinnaholic for the full compensation, including fringe benefits and expenses, paid to Cinnaholic's representative managing the bakery. This Management Fee is in addition to the Advertising Fee and other fees required under the agreement, except for the Royalty Fee.
The FDD states that Cinnaholic has a duty to utilize only reasonable efforts while managing the bakery. Cinnaholic will not be liable to the franchisee or its owners for any debts, losses, or obligations the bakery incurs, or to any of the franchisee's creditors for supplies or services purchased during Cinnaholic's management. This arrangement aims to protect Cinnaholic from liabilities while ensuring the bakery continues to operate and address the franchisee's default.