What is the definition of a 'Bound Party' in the Cinnaholic agreement?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
In addition to and not in limitation of any other restrictions on Franchisee contained herein, Franchisee and Franchisee's spouse, and, if Franchisee is not an individual, its shareholders, members, partners and managers, as applicable, and their spouses (each, a "Bound Party"), agree that they will not, during the term of this Agreement, directly or indirectly, for and on behalf of itself, himself, herself or any other person or entity, during the term of this Agreement (a) have any direct or indirect interest as a disclosed or beneficial owner in a Competitive Business (as defined below), regardless of location or (b) perform services as a director, officer, manager, employee, consultant, representative, agent, or otherwise for a Competitive Business, regardless of location.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, a "Bound Party" is defined within the context of restrictive covenants in the franchise agreement. Specifically, if the franchisee is an individual, the Bound Party includes the franchisee's spouse. If the franchisee is not an individual (e.g., a corporation or LLC), the Bound Parties include its shareholders, members, partners, and managers, as applicable, and their spouses.
These Bound Parties are subject to certain restrictions, primarily covenants not to compete with Cinnaholic. During the term of the franchise agreement, Bound Parties are prohibited from having any direct or indirect interest in a Competitive Business, regardless of its location. They are also restricted from performing services for a Competitive Business in any capacity, such as a director, officer, manager, employee, consultant, or agent.
Post-termination, these restrictions continue for one year within a five-mile radius of any Cinnaholic Bakery. This means that after the franchise agreement ends, the franchisee and the Bound Parties cannot be involved in a Competitive Business within that specified area. The definition of "Competitive Business" includes any bakery or food service business engaged in the retail or wholesale production or sale of baked goods, deriving more than 50% of its revenue from cinnamon rolls, excluding other Cinnaholic Bakeries operated under a franchise agreement. These restrictions are designed to protect Cinnaholic's business interests and prevent franchisees and related parties from using confidential information or competing unfairly after the franchise relationship ends.