Does the Cinnaholic franchise agreement address local advertising requirements?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
11.3.
Local Advertising.
Franchisee agrees that, in addition to the payment of the Advertising Fee and any amounts required under Section 11.1 hereof, it will spend a reasonable amount each calendar quarter for local market advertising but in no event less than 2% of Gross Sales per calendar quarter.
The amount of advertising funds expended by Franchisee for individual local market advertising shall be determined by Franchisee, subject to the foregoing minimum requirement.
Local advertising expenditures shall not include incentive programs, including, without limitation, costs of honoring coupons, food costs incurred in honoring sales promotions, salaries, contributions, donations, press parties, in-store fixtures or equipment, menus, serving guides and nutritional facts, yellow page advertising and exterior or interior signage.
If Franchisee fails to make advertising expenditures in accordance with this Section, Franchisor shall have the right to spend an amount not to exceed 2% of the Gross Sales of the Bakery on local advertising on behalf of Franchisee, and Franchisee must reimburse Franchisor for such expenses.
Failure to comply with this Section shall be deemed a material breach of this Agreement.
11.4.
Advertising Cooperatives.
In connection with the Bakery and any and all other CINNAHOLIC® Bakeries owned or operated by Franchisee, Franchisee shall participate, if required by Franchisor, in any local, regional or national cooperative advertising group, consisting of other franchisees of CINNAHOLIC® Bakeries, when and if any such groups are created (each, an "Advertising Cooperative").
The particular Advertising Cooperative(s) in which Franchisee may be required to participate shall be designated by Franchisor in its sole discretion (which designations may be based upon, without limitation, the particular Designated Market Area or the Area of Dominant Influence, as those terms are used in the advertising industry, where the CINNAHOLIC® Bakeries operated by Franchisee are located).
Franchisee's payments to any Advertising Cooperative shall be determined by Franchisee and those other franchisees of the CINNAHOLIC® System and/or Franchisor, as the case may be, who are participants in such Advertising Cooperative, as set forth in the by-laws of that Advertising Cooperative or membership, dues, participation or other payment agreements of such Advertising Cooperative.
Franchisee, however, may not be required to spend more than 2% of Gross Sales per annum in connection with any Advertising Cooperative.
Amounts paid to an Advertising Cooperative shall be credited against payments Franchisee is otherwise required to make for local advertising as required by Section 11.3 above.
Any payments to an Advertising Cooperative shall be in addition to the amounts required to be paid or spent under Sections 11.1 and 11.2 hereof.
Franchisee shall enter into such formal agreements with such other franchisees of the CINNAHOLIC® System and/or Franchisor, as the case may be, as shall be necessary or appropriate to accomplish the foregoing and Franchisee shall abide by such formal agreements and decisions that the Advertising Cooperative is authorized by Franchisor to make related to advertising and marketing in the area covered by the Advertising Cooperative.
If Franchisee becomes delinquent in its dues or other payments to the Advertising Cooperative or fails to abide by any formal agreements or authorized decisions of the Advertising Cooperative, such delinquency or failure shall be deemed a failure to participate in the Advertising Cooperative and a material breach of this Agreement.
Franchisor may upon 30 days' written notice to Franchisee suspend or terminate an Advertising Cooperative's program or operations.
As a member, officer or director of an Advertising Cooperative, at the request of Franchisor, Franchisee shall provide to Franchisor all information requested by Franchisor related to such Advertising Cooperative and Franchisee shall have the obligation to provide such information within 10 days after Franchisor's request to Franchisee.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, franchisees are required to engage in local advertising. Specifically, franchisees must spend a minimum of 2% of their gross sales each calendar quarter on local market advertising. The franchisee determines the exact amount spent, provided it meets this minimum threshold. Failure to meet this advertising expenditure requirement constitutes a material breach of the franchise agreement, potentially allowing Cinnaholic to spend up to 2% of the bakery's gross sales on local advertising on the franchisee's behalf, with the franchisee responsible for reimbursing Cinnaholic for these expenses.
The franchise agreement specifies what does NOT qualify as a local advertising expenditure. These exclusions include incentive programs, the cost of honoring coupons, food costs related to sales promotions, salaries, contributions, donations, press parties, in-store fixtures or equipment, menus, serving guides, nutritional facts, yellow page advertising, and exterior or interior signage. This provides clarity on the types of expenses that can and cannot be counted toward the local advertising requirement.
In addition to the mandatory local advertising, Cinnaholic franchisees may be required to participate in local, regional, or national advertising cooperatives at Cinnaholic's discretion. While the franchisee and other members of the cooperative determine the specific payments, the franchisee cannot be required to spend more than 2% of gross sales per annum on the advertising cooperative. Payments made to an advertising cooperative can be credited against the franchisee's local advertising obligations under Section 11.3. Failure to meet the financial obligations or abide by the agreements of the Advertising Cooperative is considered a material breach of the Cinnaholic franchise agreement.