What is the consequence if a Cinnaholic franchisee violates the transfer restrictions?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee shall not subfranchise, sell, assign, transfer, merge, convey or encumber (each, a "Transfer"), the Bakery, the Franchised Site, this Agreement or any of its rights or obligations hereunder, or suffer or permit any such Transfer of the Bakery, the Franchised Site, this Agreement or its rights or obligations hereunder to occur by operation of law or otherwise without the prior express written consent of Franchisor.
In addition, if Franchisee is a corporation, limited liability company, partnership, business trust, or similar association or entity, the shareholders, members, partners, beneficiaries, investors or other equity holders, as the case may be, may not Transfer their equity interests in such corporation, limited liability company, partnership, business trust, or similar association or entity, without the prior written consent of Franchisor.
Furthermore, in the event that any shareholder, member, partner, investor or other equity holder of Franchisee (the "Equity Holder") is a corporation, limited liability company, partnership, business trust, or similar association or entity, the interests of the shareholders, members, partners, beneficiaries, investors or other equity holders, as the case may be, in such Equity Holder, may not be Transferred, without the prior written consent of Franchisor.
Franchisor will not unreasonably withhold consent to a Transfer provided the requirements of Section 19.4 have been satisfied.
Any Transfer in violation of this Section shall be void and of no force and effect.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, if a franchisee makes an unauthorized transfer of the franchise agreement, the franchise, the bakery, or an ownership interest in the franchisee, such transfer will be considered void and of no force and effect.
Cinnaholic requires franchisees to obtain prior written consent from the franchisor before any transfer of the bakery, the franchised site, the agreement, or any rights or obligations under the agreement can occur. This restriction extends not only to the franchisee but also to equity holders such as shareholders, members, partners, beneficiaries, and investors. These equity holders must also obtain prior written consent from Cinnaholic before transferring their equity interests.
Cinnaholic states that it will not unreasonably withhold consent to a transfer if the requirements outlined in Section 19.4 of the franchise agreement are met. This indicates that while transfers are restricted, there is a process for seeking approval, and Cinnaholic is expected to act reasonably in considering such requests. The inclusion of such stipulations is fairly standard in franchising, as franchisors seek to maintain control over who enters their system while also providing a mechanism for franchisees to eventually exit.