What is the condition for the Cinnaholic Development Agreement to remain in effect even if a Franchise Agreement is terminated?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
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Franchise Agreement
| Provision | Section in Franchise Agreement | Summary | |
|---|---|---|---|
| a. | Length of the franchise term | Section 2.1 | 10 years |
| b. | Renewal or extension of the term | Section 2.2 | If you meet the requirements, you can renew for one additional consecutive 10 year term; after that you will have no right to renew the Franchise Agreement. |
| c. | Requirements for franchisee to renew or extend | Section 2.2 | You must: provide written notice of election to renew; not be in default of the Franchise Agreement or any other agreement relating to the Bakery; sign the then-current form of Franchise Agreement; pay a renewal fee; refurbish the Bakery, if required; complete any required retraining program; sign the current form of general release in Exhibit J to this Disclosure Document; and maintain ownership or leasehold interest in the Bakery location or secure a suitable alternative. Terms of the then-current form of Franchise Agreement may differ materially from any and all of those contained in the Franchise Agreement attached to this Disclosure Document. |
| d. | Termination by franchisee | Section 21.1 | You can terminate only if we fail to cure a default under the Franchise Agreement within 90 days (or 150 days in some instances) after you give us written notice of termination. |
| e. | Termination by franchisor without cause | Not Applicable | Not Applicable. Termination of the Development Agreement does not allow for the termination of any then in force Franchise Agreement. Termination of any Franchise Agreement does not allow for termination of the Development Agreement, so long as Franchisee is otherwise in compliance with its development schedule. |
| f. | Termination by franchisor with cause | Sections 21.2 and 21.3 | We can terminate only if you default or if certain events (described in (g) and (h) below) occur. In some instances, you will have an opportunity to cure the default. Termination of the Development Agreement does not allow for the termination of any then in force Franchise Agreement. Termination of any Franchise Agreement does not allow for termination of the Development Agreement, so long as Franchisee is otherwise in compliance with its development schedule. |
| g. "Cause" defined – curable defaults | Section 21.3 | Failure to comply with our standards and procedures or any term of the Franchise Agreement not covered in "h" below, including: failure to submit required reports; failure to relocate; failure to comply with any of the terms and conditions of any other agreement entered into by you in connection with your Bakery; failure to maintain required insurance; and failure to restore Bakery to full operation if it is rendered inoperable by casualty. You have 30 days (or 60 days in some instances) after we give you written notice to cure the default. Termination of the Development Agreement does not allow for the termination of any then in force Franchise Agreement. Termination of any Franchise Agreement does not allow for termination of the Development Agreement, so long as Franchisee is otherwise in compliance with its development schedule. | |
| h. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION THE FRANCHISE RELATIONSHIP (FDD pages 42–50)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, the termination of any Franchise Agreement does not automatically lead to the termination of the Development Agreement. The Development Agreement remains in effect as long as the franchisee is otherwise in compliance with its development schedule. This means that even if a specific Cinnaholic franchise location ceases operation or its agreement is terminated, the franchisee's broader obligations and rights under the Development Agreement to open other locations within a defined territory remain valid, provided they continue to meet the agreed-upon development timeline.
This provision offers a degree of security for Cinnaholic franchisees who have committed to developing multiple units. It ensures that a setback at one location does not necessarily jeopardize their entire investment and development plan. However, it also places a responsibility on the franchisee to maintain progress in opening new locations as per the development schedule outlined in the Development Agreement. Failure to adhere to this schedule could still result in the termination of the Development Agreement, regardless of the status of individual franchise agreements.
This type of arrangement is relatively common in multi-unit franchising, where developers are given exclusive territories with the expectation of opening a certain number of locations within a specified timeframe. The Cinnaholic clause balances the franchisor's need to ensure territorial development with the franchisee's potential challenges in managing individual locations. Prospective franchisees should carefully review the development schedule and ensure they have the resources and capabilities to meet those obligations, even if unforeseen issues arise at some of their locations.