Does the Cinnaholic franchise agreement grant territorial protection?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
- 3.2. Territorial Protection. Franchisor will not establish for itself or grant a franchise to any other party to establish a Bakery within the territory specified on Exhibit A attached hereto (the "Franchise Territory"). Notwithstanding anything herein to the contrary, if any disagreement arises regarding the area comprising the Franchise Territory, then Franchisor's decision as to the definition of the Franchise Territory shall be final and binding. Except as expressly provided in the first sentence of this Section 3.2, Franchisee acknowledges that the franchise granted under this Agreement is non-exclusive and Franchisee has no territorial protection and Franchisee has no right to exclude, control or impose conditions on the location or development of other or future franchises under the Marks, or on any sales or distribution of products under the Marks or other business activities of Franchisor or any other party licensed to use the Marks.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to the 2025 Cinnaholic Franchise Disclosure Document, the franchise agreement does provide limited territorial protection. Specifically, Cinnaholic will not establish or franchise another bakery within the territory specified in Exhibit A of the franchise agreement. However, Cinnaholic retains significant rights within and outside the franchisee's territory. If there is a disagreement about the boundaries of the territory, Cinnaholic's decision is final.
Despite this limited protection, the franchise granted is non-exclusive, meaning franchisees do not have the right to control or impose conditions on other franchises, sales, or business activities related to the Cinnaholic brand. Cinnaholic retains the right to establish other Cinnaholic bakeries or businesses using the brand's trademarks outside the Franchise Territory, offer products and services within the Franchise Territory through various distribution channels like grocery stores or the internet, and establish Cinnaholic franchises at destination locations like airports or malls, even within the franchisee's territory.
This means that while a Cinnaholic franchisee has a defined territory where the franchisor will not open another traditional bakery, the franchisee faces potential competition from other channels and locations managed or licensed by Cinnaholic. A prospective franchisee should carefully review Exhibit A of the Franchise Agreement to understand the exact boundaries of their protected territory and consider the potential impact of Cinnaholic's retained rights on their business.