In California, when does a Cinnaholic franchisee pay the initial fees?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
The Department has determined that we, the franchisor, have not demonstrated we are adequately capitalized and/or that we must rely on franchise fees to fund our operations. The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business. The payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 27–35)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, California franchisees do not pay initial fees until certain conditions are met. The Commissioner has imposed a fee deferral condition because Cinnaholic has not demonstrated that they are adequately capitalized or do not rely on franchise fees to fund their operations. Therefore, Cinnaholic defers the collection of all initial fees from California franchisees until Cinnaholic has completed all of its pre-opening obligations and the franchisee is open for business.
This means a prospective Cinnaholic franchisee in California will not be required to pay the initial franchise fee upfront. Instead, the payment is deferred until Cinnaholic fulfills its obligations, such as providing training, site selection assistance, and other support outlined in the franchise agreement. Only once these obligations are met and the franchisee's Cinnaholic bakery is open for business will the initial fees become due.
This arrangement protects the franchisee by ensuring that Cinnaholic is committed to providing the necessary support before receiving the initial franchise fee. It also reduces the financial risk for the franchisee, as they are not paying the fee until they are ready to start generating revenue. This type of fee deferral is not standard across all franchises, so it represents a potentially favorable condition for franchisees in California.