In the event of death or disability of a Cinnaholic franchisee, are transfers by devise, inheritance, or trust provisions subject to transfer conditions?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
Upon Franchisee's death or Disability (as such term is hereinafter defined), this Agreement or the ownership interest of any deceased or disabled shareholder, partner, member or other equity holder of the Franchisee or an Equity Holder must be Transferred to a party approved by Franchisor.
Any Transfer, including, without limitation, transfers by devise or inheritance or trust provisions, shall be subject to the same conditions for Transfers set forth in Section 19.4.
Franchisor shall not unreasonably withhold its consent to the Transfer of this Agreement or any ownership interest to the deceased or disabled Franchisee's or Equity Holder's spouse, heirs or members of his or her immediate family, provided all requirements of Section 19.4 have been complied with (except payment of the transfer fee, which shall not apply to such Transfers).
A "Disability" shall have occurred with respect to Franchisee if Franchisee, or, if Franchisee is a corporation, partnership or limited liability company, its controlling shareholder, partner, member or other equity holder, is unable to actively participate in its activities as Franchisee hereunder for any reason for a continuous period of six months.
As used in this Section 19.3, "Franchisee" may include a disabled or deceased controlling shareholder, partner or member where the context so requires.
- 19.4.
Approval of Assignment.
Franchisor's approval of any Transfer is, in all cases, contingent upon the following: the purchaser and/or the controlling persons of the purchaser having a satisfactory credit rating, being of good moral character, having business qualifications satisfactory to Franchisor, being willing to comply with Franchisor's training requirements and being willing to enter into an agreement in writing to assume and perform all of Franchisee's duties and obligations hereunder and/or enter into a new Franchise Agreement, if so requested by Franchisor, and agreeing to enter into any and all agreements with Franchisor that are being required of all new franchisees, including a guaranty agreement, or any other agreement which may require payment of different or increased fees from those paid under this Agreement; provided, however, the amount of the Royalty Fees paid hereunder shall not be increased upon an assignment;
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, in the event of the death or disability of a franchisee, the franchise agreement or ownership interest must be transferred to a party approved by Cinnaholic. This requirement also applies to the ownership interest of any deceased or disabled shareholder, partner, member, or other equity holder. Transfers by devise, inheritance, or trust provisions are subject to the same transfer conditions outlined in Section 19.4 of the franchise agreement.
Cinnaholic will not unreasonably withhold consent to the transfer of the agreement or any ownership interest to the deceased or disabled franchisee's spouse, heirs, or immediate family members, provided all the requirements of Section 19.4 are met. However, the transfer fee is waived for such transfers to family members. A "Disability" is defined as the franchisee, or the controlling equity holder if the franchisee is an entity, being unable to actively participate in the business for a continuous period of six months.
The conditions for transfer, as detailed in Section 19.4, include the purchaser having a satisfactory credit rating, good moral character, and business qualifications acceptable to Cinnaholic. The purchaser must also be willing to comply with Cinnaholic's training requirements and agree in writing to assume all of the franchisee's duties and obligations, potentially entering into a new franchise agreement if requested by Cinnaholic. Additionally, the purchaser must agree to any and all agreements required of new franchisees, including a guaranty agreement, which may involve different or increased fees, although the royalty fees will not increase upon assignment.
This clause ensures that Cinnaholic maintains control over who operates its franchises, even in unforeseen circumstances like death or disability. For a prospective franchisee, this means that their heirs or family members would need to meet Cinnaholic's standard qualifications to take over the franchise, although they would be exempt from paying a transfer fee. It is important for franchisees to understand these conditions and discuss them with their families and legal advisors to ensure a smooth transition plan in case of death or disability.