Does the Cinnaholic Development Rights agreement include a reservation of rights?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
Developer acknowledges and agrees that by virtue of this Agreement and the Area of Responsibility, Developer does not have exclusive territorial rights, protected territory, or other rights to exclude, control or impose conditions on the location or development of other or future CINNAHOLIC® Bakeries or on Franchisor's activities, except as may be provided in an applicable Franchise Agreement.
- 2.2.
Reservation of Rights.
Franchisor retains the right, in its sole discretion, to:
(i) establish and operate, and grant to other franchisees or licensees the right to establish and operate, a CINNAHOLIC® Bakery or any other business using the name "CINNAHOLIC®" and all other trade names, trademarks, service marks, commercial symbols, logos, emblems, signs, slogans and insignia developed for use with the CINNAHOLIC System from time to time (collectively, the "Marks"), the CINNAHOLIC® System or any variation of the Marks or the CINNAHOLIC® System, in any location (including inside the Area of Responsibility) and on any terms and conditions that Franchisor deems appropriate;
(ii) develop, use and franchise anywhere the rights to any trade names, trademarks, service marks, commercial symbols, logos, emblems, signs, slogans, insignia, patents or copyrights not designated by Franchisor as Marks, for use with similar or different franchise systems for the sale of similar or different products or services than those constituting a part of the CINNAHOLIC® System, without granting Developer any rights therein;
(iii) offer, ship, sell and provide products or services identified by the Marks or other trademarks, service marks, commercial symbols or emblems to customers located anywhere through any distribution channel or method, including grocery stores, convenience stores, the Internet (or any other existing or future form of electronic commerce), and delivery services within and outside the Area of Responsibility, irrespective of the proximity to any Bakery established hereunder without compensation to Developer;
(iv) own, operate, franchise or license anywhere, even in close proximity to any Bakeries developed hereunder, Bakeries of any other type whatsoever operating under marks other than the Marks; and
(v) engage in any other activity, action or undertaking that Franchisor is not expressly prohibited from taking under this Agreement.
Source: Item 23 — RECEIPT (FDD pages 62–269)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, the Development Rights agreement does include a reservation of rights for the franchisor. Specifically, while the developer receives the right to establish Cinnaholic bakeries within a defined area, this right is non-exclusive. Cinnaholic retains significant latitude to operate or franchise other businesses, even within the developer's area.
Cinnaholic reserves the right to establish and operate Cinnaholic bakeries or any other business using the Cinnaholic name and associated trademarks, anywhere, including within the developer's Area of Responsibility. This means Cinnaholic could open its own corporate stores or grant franchises to others in the same area where a developer is building their franchise locations. Cinnaholic also retains the right to develop and franchise other systems with different trademarks for similar or different products without granting the developer any rights to those systems.
Furthermore, Cinnaholic can sell products or services identified by their trademarks through any distribution channel, including grocery stores, the internet, and delivery services, regardless of their proximity to the developer's bakeries and without compensating the developer. Cinnaholic can also own, operate, franchise, or license bakeries of any other type under different marks, even in close proximity to the developer's locations. Finally, Cinnaholic retains the right to engage in any activity not expressly prohibited by the Development Rights agreement, providing broad discretion to the franchisor.
This reservation of rights has significant implications for a prospective Cinnaholic developer. It means that even with a Development Rights agreement, the developer's territory is not protected from competition by Cinnaholic itself or other franchisees or business ventures that Cinnaholic may introduce. This lack of territorial exclusivity is a notable risk factor that developers should carefully consider, as it could impact the potential profitability of their Cinnaholic bakeries.