Does the Cinnaholic franchise agreement require automated bank drafts for payments?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
rom Gross Sales: (a) the amount of refunds, allowances or discounts to customers (including coupon sales) up to 10% of the Gross Sales, provided the related sales have previously been included in Gross Sales; and (b) the amount of any excise or sales tax levied upon retail sales and paid over to the appropriate governmental authority.
- 5.3. Automated Bank Draft. Franchisee understands and agrees that Franchisor reserves the right and may require, in its sole discretion, that all Royalty Fees, Advertising Fees, Advertising Cooperative (as defined below) contributions and other fees or contributions required to be paid to Franchisor or any Advertising Cooperative hereunder must be paid by automated bank draft or other reasonable means necessary to ensure payment of such fees are received by Franchisor or the appropriate Advertising Cooperative. Franchisee agrees to comply with Franchisor's payment instructions.
- 5.4. Late Payments and Insufficient Funds. All overdue payments for Royalty Fees, Advertising Fees and other fees required to be paid hereunder shall bear interest from the date due at the rate specified by Franchisor from time to time, up to the highest rate permitted by the law, but in no event shall such rate exceed 18% per annum. Interest shall accrue on all late payments regardless of whether Franchisor exercises its right to terminate this Agreement as provided for herein. In addition to its right to charge interest as provided herein, Franchisor may charge Franchisee a $100.00 late payment fee for all such overdue payments and a $100.00 insufficient funds fee for each check, automated bank draft payment, or other payment method that is not honored by Franchisee's financial institution. Franchisee acknowledges that Franchisor
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, the franchise agreement does not mandate automated bank drafts for all payments. However, Cinnaholic retains the right to require that franchisees make payments for Royalty Fees, Advertising Fees, Advertising Cooperative contributions, and other fees via automated bank draft or other means deemed necessary by Cinnaholic to ensure timely receipt of payments. This decision is at Cinnaholic's sole discretion.
If a Cinnaholic franchisee's payments are overdue, the franchisee will incur interest on the outstanding amount. The interest rate is determined by Cinnaholic, but will not exceed the maximum rate permitted by law or 18% per annum. Cinnaholic may also charge a $100 late payment fee for overdue amounts, as well as a $100 insufficient funds fee for any payment method, including checks or automated bank drafts, that are not honored by the franchisee's bank. Cinnaholic also has the right to offset any amounts the franchisee owes against any amounts Cinnaholic may owe the franchisee.
Cinnaholic specifies that all payments made by the franchisee will be applied at Cinnaholic's discretion to any past due indebtedness, regardless of any designation made by the franchisee. This means that if a franchisee has outstanding debts, Cinnaholic can allocate new payments to cover those debts first, which could impact the franchisee's current obligations.