Can Cinnaholic forgive, waive, settle, or compromise claims by or against the Advertising Fund?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
so, and will not set maximum or minimum prices which you must charge.
Advertising. We provide advertising materials and services to you through a national advertising fund we have established and control (the "Advertising Fund"). You must participate in the Advertising Fund by contributing 2% of Gross Sales. All affiliate-owned Bakeries or Bakeries we own will also contribute to the Advertising Fund on an equal percentage basis with all franchised Bakeries. The Advertising Fund is established as a separate banking account and monies received from you will be accounted for separately from our other funds. There is no fiduciary or trust relationship created by our administering the Advertising Fund. We may cause the Advertising Fund to be incorporated or operated through a separate entity if we deem appropriate. (See Franchise Agreement, Section 11.2.) We anticipate all of our franchisees will contribute to the Advertising Fund, although there is no prohibition against us charging higher or lower rates for future franchisees. (See Franchise Agreement, Section 11.2.) We also may forgive, waive, settle, or compromise claims by or against the Advertising Fund. We may defer or reduce a franchisee's contribution. If we terminate the Advertising Fund, we will distribute all unused monies to the contributors in proportion to their respective contributions during a pre-determined period. For the 2024 fiscal year end, we collected $504,162.50 in the Ad Fund. We expended $444,137.79 in the following approximate proportions: Online Advertising ($89,825.20, or 20.22%), Social Media ($268,087.81, or 60.36%), Marketing Consultants ($61,800, or 13.91%), Creative ($12,846.00, or 2.89%), Publication Ads ($3,916.85, or .88%), Website ($6,030.88, or 1.36%), Administrative ($1,333.65, or .30%), and Miscellaneous ($297.40, or .08%). Fund expenses were more than Fund contributions during the year. $60,024.71 was collected in 2024, b
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 27–35)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, Cinnaholic has the authority to forgive, waive, settle, or compromise claims related to the Advertising Fund. This fund is used for advertising materials and services, with franchisees contributing 2% of their gross sales. All affiliate-owned or franchisor-owned bakeries contribute an equal percentage. The Advertising Fund operates as a separate banking account, and Cinnaholic may choose to incorporate it or operate it through a separate entity.
This provision grants Cinnaholic significant flexibility in managing the Advertising Fund. For instance, Cinnaholic could choose to waive a late fee for a franchisee struggling financially or settle a dispute with a vendor providing advertising services. The FDD also states that Cinnaholic may defer or reduce a franchisee's contribution to the fund.
For the 2024 fiscal year, the Ad Fund collected $504,162.50 and expended $444,137.79. The expenditures were allocated to online advertising (20.22%), social media (60.36%), marketing consultants (13.91%), creative (2.89%), publication ads (.88%), website (1.36%), administrative (.30%), and miscellaneous (.08%). The remaining $60,024.71 was not expended and remains in the fund for use in 2025 or later years. This demonstrates how Cinnaholic manages and allocates the Advertising Fund, and the ability to forgive or compromise claims could impact these allocations.
Prospective franchisees should consider the implications of Cinnaholic's authority over the Advertising Fund. While this may allow for flexibility and responsiveness in managing the fund, it also means that Cinnaholic has considerable discretion in how the funds are used and in resolving any disputes related to the fund. Franchisees should seek clarification on how Cinnaholic intends to exercise this authority and what safeguards are in place to ensure that the fund is managed in a fair and transparent manner.