Is a Cinnaholic franchisee obligated to comply with Franchisor's payment instructions?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
The failure or repeated delay in making prompt payments in accordance with the terms of invoices and statements rendered to Franchisee for purchases of supplies, equipment and other items, whether purchased from Franchisor or others, or defaults in making payments due hereunder or under any other agreement entered into in connection with the operation of the Bakery, will result in a loss of credit rating and standing which will be detrimental to Franchisor and other franchisees of the CINNAHOLIC® System. Franchisee agrees to pay when due all amounts which it owes to anyone for supplies, equipment and other items used in connection with the Bakery and all payments owed hereunder or under any other agreement entered into in connection with the operation of the Bakery. Franchisee must notify Franchisor immediately when and if Franchisee becomes more than 90 days delinquent in the payment of any of the obligations mentioned above.
Franchisor may impose fines for Franchisee's failure to comply with the Operations Manual. Before any fine may be imposed, Franchisor must first have given Franchisee one written notice of the non-compliance with the Operations Manual; thereafter, any further non-compliance with that specific provision of the Operations Manual shall allow the imposition of a fine. Fines shall be in the amount of $100 to $1000, per violation, per day, as determined in Franchisor's sole discretion. However, Franchisor may elect to provide guidance in the Operations Manual regarding the amount of fines it may levy for given acts of noncompliance. Franchisee must pay any fines levied within ten days of written notice of the fine from Franchisor. If the fine is not paid within that time, Franchisor may cause an electronic funds transfer from Franchisee's bank account for the amount of any fine. Failure to pay any fine within ten days shall be a material default under this Agreement.
(Virginia)
The following Addendum modifies and supersedes the Cinnaholic Franchising, LLC Franchise Agreement (the "Agreement") with respect to CINNAHOLIC® franchises offered or sold to either a resident of the State of Virginia or a non-resident who will be operating a CINNAHOLIC® franchise in the State of Virginia pursuant to the Virginia State Corporation Commission's Division of Securities and Retail Franchising requirement for us to defer payment of the initial franchise fee and other initial payments owed by franchisees to the franchisor until the franchisor has completed its pre-opening obligations under the franchise agreement, as follows:
- The first sentence of Section 4 of the Agreement is deleted in its entirety and replaced with the following:
The Virginia State Corporation Commission's Division of Securities and Retail Franchising requires us to defer payment of the initial franchise fee and other initial payments owed by franchisees to the franchisor until the franchisor has completed its preopening obligations under the franchise agreement.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, franchisees are obligated to make payments as instructed by Cinnaholic. Specifically, franchisees must make prompt payments for supplies, equipment, and other items, whether purchased from Cinnaholic or other suppliers. This obligation extends to all payments due under the Franchise Agreement or any other agreement related to the operation of the Cinnaholic bakery. Failure to make these payments on time can negatively impact the franchisee's credit rating and standing, which in turn can be detrimental to Cinnaholic and other franchisees within the system.
The FDD also states that if a Cinnaholic franchisee becomes more than 90 days delinquent in any of these payments, they must immediately notify Cinnaholic. This notification requirement underscores the importance of maintaining open communication with Cinnaholic regarding any financial difficulties.
Furthermore, Cinnaholic has the right to impose fines on franchisees for non-compliance with the Operations Manual, which includes payment obligations. Before imposing a fine, Cinnaholic must provide written notice of the non-compliance. Subsequent violations of the same provision can result in fines ranging from $100 to $1000 per violation per day, determined at Cinnaholic's discretion. Franchisees must pay these fines within ten days of receiving written notice. Failure to pay fines within this timeframe constitutes a material default under the Franchise Agreement, and Cinnaholic may initiate an electronic funds transfer from the franchisee's bank account to cover the outstanding amount.
In Virginia, the payment of the initial franchise fee and other initial payments are deferred until Cinnaholic has completed its pre-opening obligations under the franchise agreement. This requirement is mandated by the Virginia State Corporation Commission's Division of Securities and Retail Franchising. This deferral provides some financial relief to new franchisees during the initial setup phase of their business.