Besides an increased royalty fee, what other penalty might Cinnaholic impose on a franchisee in default?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
. Upon the expiration or termination of this Agreement for any reason, Franchisee must return all copies of the Operations Manual to Franchisor, and upon Franchisor's request, certify to Franchisor that Franchisee has not kept any copies in any medium. The Operations Manual is confidential, copyrighted and Franchisor's exclusive property.
Franchisor may impose fines for Franchisee's failure to comply with the Operations Manual. Before any fine may be imposed, Franchisor must first have given Franchisee one written notice of the non-compliance with the Operations Manual; thereafter, any further non-compliance with that specific provision of the Operations Manual shall allow the imposition of a fine. Fines shall be in the amount of $100 to $1000, per violation, per day, as determined in Franchisor's sole discretion. However, Franchisor may elect to provide guidance in the Operations Manual regarding the amount of fines it may levy for given acts of noncompliance.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to the 2025 Cinnaholic Franchise Disclosure Document, in addition to the increased royalty fee, Cinnaholic may impose fines for a franchisee's failure to comply with the Operations Manual. Before any fine is imposed, Cinnaholic must first provide the franchisee with one written notice of non-compliance. After that initial notice, any further non-compliance with that specific provision allows Cinnaholic to impose a fine. These fines can range from $100 to $1000 per violation, per day, as determined by Cinnaholic at its sole discretion.
The franchisee is required to pay any levied fines within ten days of receiving written notice from Cinnaholic. If the franchisee fails to pay the fine within this timeframe, Cinnaholic has the right to initiate an electronic funds transfer from the franchisee's bank account to cover the amount of the fine. Failure to pay any fine within the ten-day period constitutes a material default under the Franchise Agreement.
This policy highlights the importance of adhering to Cinnaholic's Operations Manual. Franchisees should carefully review the manual and ensure full compliance to avoid potential fines. The fact that fines can be levied per violation, per day, means that non-compliance can quickly become expensive. The ability of Cinnaholic to directly withdraw funds from the franchisee's account further underscores the seriousness of these penalties.