Does the Cinnaholic Development Agreement define 'Bound Party' in the context of termination?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
t forth; and
- (viii) the Marks not being used in any advertising for any Transfer prohibited by Sections 13.2 and 13.3 hereof.
- 13.5. Removal of General Partner. If Developer is a limited partnership, Developer may not remove or appoint, or permit the limited partners to remove or appoint, a new or successor general partner without the prior written consent of Franchisor (even if such appointment is due to the resignation, death or disability of the General Partner).
14. RESTRICTIVE COVENANTS
14.1. Covenants Not to Compete.
(i) Non-Competition During Term. In addition to and not in limitation of any other restrictions on Developer contained herein, Developer and Developer's spouse, and, if Developer 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, (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.
(ii) Post-Term Non-Competition. In addition to and not in limitation of any other restrictions on Developer contained herein, Developer and the Bound Parties agree that they will not, for one year following the effective date of termination or expiration of this Agreement for any reason, or following the date of a Transfer by Developer, directly or indirectly, for and on behalf of itself, himself, herself or any other person or entity, (a) have any direct or indirect interest as a disclosed or beneficial owner in a Competitive Business or (b) perform services as a director, officer, manager, employee, consultant, representative, agent, or otherwise for a Competitive Business which, in either case, is located or operating within a five mile radius of any CINNAHOLIC® Bakery.
(iii) General. For purposes of this Agreement, the term "Competitive Business" means any business operating, or granting franchises or licenses to others to operate, a bakery or other food service business (a) engaged in the retail or wholesale production or sale of baked goods (including, but not limited to, all cinnamon rolls and other baked goods) and (b) that derives more than 50% of its revenue from sales of cinnamon rolls (other than another CINNAHOLIC® Bakery operated by Developer under license from Franchisor). Neither Developer nor the other Bound Parties will be prohibited from owning securities in a Competitive Business if they are listed on a stock exchange or traded on the over-the-counter market and represent 5% or less of the number of shares of that class of securities which are issued and outstanding. The parties acknowledge that the covenants contained in Section 14.1 are based on the reason and understanding that Developer and the Bound Parties will possess knowledge of Franchisor's business and operating methods and confidential information, disclosure and use of which would prejudice the interest of Franchisor and its franchisees. Developer further understands and acknowledges the difficulty of ascertaining monetary damages and the irreparable harm that would result from breach of these covenants. If any part of this restriction is found to be unreasonable in time or distance, such time or distance may be reduced by appropriate order of the court to that deemed reasonable. Franchisor shall, as a matter of course, receive injunctive relief to enforce such covenants in addition to any other relief to which it may be entitled at law or in equity. Franchisor shall receive such injunctive relief without the necessity of posting bond or other security, such bond or other security being hereby waived.
14.2. Non-Solicitation of Employees.
Source: Item 23 — RECEIPT (FDD pages 62–269)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, the term 'Bound Party' is defined within the context of restrictive covenants, specifically concerning non-competition, non-solicitation, and trade secrets. The Development Agreement states that if the Developer is not an individual, the Bound Parties include its shareholders, members, partners, and managers, as applicable, and their spouses. These 'Bound Parties' are subject to certain restrictions and obligations outlined in Section 14 of the Development Agreement.
These restrictions include covenants not to compete during the term of the agreement and for one year following the termination or expiration of the agreement, or after a transfer by the Developer. Bound Parties are also restricted from soliciting employees of Cinnaholic or its franchisees during the agreement's term and for one year after termination. Additionally, they must maintain the confidentiality of Cinnaholic's trade secrets and confidential information both during and for a period of time after the agreement, with trade secrets potentially restricted indefinitely.
These stipulations are reinforced by the requirement that each Bound Party sign and deliver Personal Covenants, agreeing to be personally bound by the provisions of Sections 14.1, 14.2, and 14.3 of the Development Agreement. This ensures that individuals associated with the Developer are legally obligated to uphold the restrictive covenants, protecting Cinnaholic's interests. Breaching or failing to comply with Section 14 by any Bound Party constitutes grounds for termination of the Development Agreement by Cinnaholic.