Does the Cinnaholic Development Rights agreement provide territorial protection?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
- 2.1.
No Territorial Protection.
Developer may establish the Bakeries required to be developed hereunder at any location within the Area of Responsibility provided that Franchisor, in its sole discretion, consents in writing to the location, the location is in a state where Franchisor is permitted to sell CINNAHOLIC® franchises, and the location is not located in a territory in which any other CINNAHOLIC® franchisee has exclusive rights or a right of first refusal.
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 not provide exclusive territorial protection. While a developer is assigned an "Area of Responsibility" where they may propose locations for Cinnaholic bakeries, this area is explicitly non-exclusive. Cinnaholic retains significant rights within this area.
Specifically, Cinnaholic can establish and operate its own bakeries or grant other franchisees the right to do so, even within the developer's Area of Responsibility. Cinnaholic can also utilize any trademarks or variations of the Cinnaholic system in any location, including the Area of Responsibility. Furthermore, Cinnaholic can sell products and services through any distribution channel, such as grocery stores, the internet, or delivery services, regardless of proximity to the developer's bakeries and without compensating the developer.
This lack of territorial protection means a Cinnaholic developer faces the risk of direct competition from other Cinnaholic outlets or alternative distribution channels within their designated area. The developer's ability to secure a specific location is also subject to Cinnaholic's approval and dependent on whether other franchisees have existing exclusive rights or rights of first refusal in that location. The developer should carefully consider these factors and conduct thorough market research to assess the potential for competition before entering into a Development Rights agreement with Cinnaholic.