Besides the exceptions described in the FDD, is a Cinnaholic franchisee obligated to purchase or lease goods, services, or real estate from Cinnaholic, its designees, or approved suppliers?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
TIONS ON SOURCES OF PRODUCTS AND SERVICES
Except as described below, you are not obligated to purchase or lease from us, our designees or suppliers approved by us, or under our specifications, any goods, services, supplies, fixtures, equipment, inventory, computer hardware and software, or real estate relating to operating your Bakery. To ensure a uniform image and quality of products and services throughout CINNAHOLIC® franchise system, all food products, supplies, ingredients, equipment, furnishings, employee uniforms, fixtures, inventory, paper products, packaging, and other items used, sold, displayed or distributed in your Bakery (i) must comply with our standards and specifications and (ii) from suppliers designated or approved in writing by us. We may designate at any time and for any reason, a single or multiple suppliers for these items and require you to purchase exclusively from the designated supplier or suppliers, which exclusive designated supplier(s) may be us or an affiliate of ours. Currently, we do not intend to be, or to appoint any of our affiliates as, an authorized supplier of any products, supplies, equipment, or other items used in the operation of the Bakery. However, we reserve the right to designate ourselves and/or any of our affiliates as an approved supplier in the future, and we may even designate ourselves or an affiliate as the sole supplier of one or more items, in which case, you would have to buy the item from us or our affiliate at our or their then-current price. Our Operations Manual and other communications will identify our standards and specifications and the names of approved or designated suppliers. If we become a designated supplier, we may charge you a reasonable mark-up, surcharge, and handling fee on any items you purchase from us. Monies you pay to us will include a profit for us. We may also designate a vendor(s) to provide food brokerage services to the CINNAHOLIC® franchise system and such vendor(s) may receive, directly or indirectly, revenue from suppliers based on purchases by CINNAHOLIC® franchisees. The revenue may be based on volume or per unit sales. There are no approved suppliers in which any of our officers own an interest. We do derive revenue, directly or indirectly, that we retain as a profit from suppliers in connection with the services or products they provide to our franchisees.
We and our affiliates have the right to receive payments or other benefits like rebates, discounts, and allowances from authorized suppliers based upon their dealings with you and other franchisees and we may use the monies we receive without restriction for any purpose we deem appropriate or necessary. Additionally, we have received rebates from various suppliers which we have placed directly into our Marketing Fund. Suppliers may pay us based upon the quantities of products the CINNAHOLIC® franchise system purchases from them. These fees will usually be based upon an amount per case or an amount per pound. We may receive fees from a supplier as a condition of our approval of that supplier. We do not provide material benefits to franchisees (for example, renewal of existing or granting additional franchises) based on their use of designated or approved suppliers. For the fiscal year ended December 31, 2024, we received $3,735 in rebates from Fun Express, $22,000 in rebates from Ventura Foods, and $6,523 in rebates from Saebert.
We may, when appropriate, negotiate purchase arrangements, including price terms, with designated and approved suppliers on behalf of the System. Some of our current approved suppliers include Sysco Foods and Tom Tedrow Architects. We may negotiate supply arrangements with suppliers for the benefit of franchisees. While we are currently developing several such arrangements, none have yet been finalized. We have not currently, but we may in the future, negotiate supply arrangements with suppliers for the benefit of franchisees. There are no approved suppliers in which any of our officers own an interest. We have negotiated price terms with some suppliers. In the future, there may be various vendors and suppliers that contribute to the cost of the annual convention for CINNAHOLIC® franchise system (the "Convention"). Monies from vendors and suppliers that are used to pay for the cost of the Convention will not be revenue to us.
During the fiscal year ended December 31, 2024, neither we, nor our affiliates, received any revenues from required purchases and leases.
Site Approval and Construction. We must approve the site for your Bakery and the site must meet our then-current site criteria. If you lease the site for your Bakery, you must collaterally assign your lease to us by signing the form of Collateral Assignment of Lease attached as an exhibit to the Development Agreement and have your landlord sign the Collateral Assignment of Lease consenting to the assignment. Under the Collateral Assignment of Lease, we will be granted the right, but not the obligation, to take possession of your Bakery's premises if your franchise agreement is terminated.
You must employ a qualified general contractor, who is reputable and experienced building units of similar retail concepts, to supervise, delegate and/or perform (i) the construction and development of the Bakery, (ii) the completion of all improvements, (iii) the outfitting of the Bakery with furnishings, fixtures and equipment, and (iv) all other services that are designated by us to be performed by the general contractor in connection with constructing the Bakery (the "General Contractor"). We may designate a single approved General Contractor or furnish you with a list of approved General Contractors for you to employ in the construction of the Bakery. You must hire a General Contractor prior to hiring the Architectural Firm (defined below).
We have designated Tom Tedrow Architects as a required supplier of design services and/or architecture services (an "Architectural Firm") to supply these services to CINNAHOLIC® franchise system. At our option, we may authorize the General Contractor to select a different architectural firm to assist in developing the Bakery. You must hire the Architectural Firm to furnish to us, for our written approval, a proposed preliminary site and construction plans and specifications (which plans and specifications must be adopted from the prototype plans provided by us) for CINNAHOLIC® Bakery which, if accepted, must not be modified, altered or changed without our prior written consent. You must sign any agreements required to obtain the services of the Architectural Firm and pay for all services provided by the Architectural Firm.
We will have the option of approving or denying a request from you to use a General Contractor and/or Architectural Firm submitted by you to develop and construct your Bakery. In connection with any request, you and the proposed General Contractor and/or Architectural Firm must submit all information and data as we may require to consider the request. We reserve the right to charge you a reasonable fee in connection with evaluating a request to use a proposed General Contractor and/or Architectural Firm. We may deny a request for any reason, including our determination to limit the number of approved General Contractors and/or Architectural Firms.
You must also adhere to our standards and specifications for the construction and design of the Bakery, which will include requirements for the interior and exterior layout, signage, fixtures, and trade dress including the color scheme. You may purchase these items from any supplier that meets our standards and specifications, unless we designate an approved supplier for an item. In which case, you must purchase the item from the approved supplier. We may, at any time, change, delete, add to, or modify any of our standards and specifications. These changes, deletions, additions, or modifications, which will be uniform for all franchisees, may require additional expenditures by you.
You must prepare all required construction plans and specifications and ensure they comply with building codes and ordinances. If your construction plans and specifications deviate from our plans and specifications, you must obtain our approval of the changes. It is your responsibility to obtain all required licenses, permits, and approvals associated with constructing and operating your Bakery.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 21–25)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, franchisees are generally not required to purchase or lease goods, services, or real estate from Cinnaholic, its designees, or approved suppliers. However, to maintain uniformity and quality across the Cinnaholic franchise system, all food products, supplies, ingredients, equipment, furnishings, employee uniforms, fixtures, inventory, paper products, packaging, and other items used in the bakery must adhere to Cinnaholic's standards and specifications and be sourced from suppliers that Cinnaholic designates or approves in writing. Cinnaholic retains the right to designate single or multiple suppliers for these items and mandate exclusive purchasing from those suppliers, which could include Cinnaholic or its affiliates.
Currently, Cinnaholic does not intend to be or appoint its affiliates as authorized suppliers, but it reserves the right to do so in the future, potentially becoming the sole supplier for certain items. If Cinnaholic becomes a designated supplier, it may charge franchisees a reasonable markup, surcharge, and handling fee, which would include a profit for Cinnaholic. The Operations Manual and other communications will outline the standards, specifications, and approved supplier information. Franchisees are also required to use a point-of-sale (POS) system from a designated supplier, such as the Square POS System, which costs approximately $1,200 plus $500 for installation, with a monthly fee of $179.
Cinnaholic estimates that purchases and leases from designated or approved suppliers, or those meeting their standards and specifications, will constitute 80% or more of the initial establishment costs and about 90% of the ongoing operating costs for the bakery. Franchisees must also use Tom Tedrow Architects as a required supplier of design and/or architecture services, although Cinnaholic may authorize the General Contractor to select a different architectural firm. Cinnaholic may also receive payments or other benefits, such as rebates, discounts, and allowances, from authorized suppliers based on their dealings with franchisees, and they may use these funds without restriction. For example, in the fiscal year ended December 31, 2024, Cinnaholic received $3,735 in rebates from Fun Express, $22,000 in rebates from Ventura Foods, and $6,523 in rebates from Saebert.
Prospective franchisees should be aware that Cinnaholic can change suppliers or standards, potentially requiring additional expenditures. While Cinnaholic aims to negotiate favorable supply arrangements, none have been finalized as of the FDD date. Franchisees are also obligated to obtain and maintain required insurance coverage and may be required to participate in purchasing cooperatives in the future. If a franchisee wishes to use a non-approved supplier, they must submit a written request for approval, and the supplier may need to undergo evaluation and inspection at the franchisee's or supplier's expense. Cinnaholic will generally respond to requests for supplier approval within 90 days.