For Cinnaholic franchises in Illinois, what condition must be met before the initial franchise/development fees are due?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
The following Addendum modifies and supersedes the Cinnaholic Franchising, LLC Market Development Agreement (the "Agreement") with respect to CINNAHOLIC franchises offered or sold to either a resident of the State of Illinois or a non-resident who will be operating a CINNAHOLIC franchise in the State of Illinois pursuant to the Illinois Franchise Disclosure Act of 1987, Ill. Comp. Stat. §§ 705/1 through 705/44, as follows:
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- Illinois law governs the Franchise Agreement(s).
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- Payment of Initial Franchise/Development Fees will be deferred until Franchisor has met its initial obligations to franchisee, and franchisee has commenced doing business. This financial assurance requirement was imposed by the Office of the Illinois Attorney General due to Franchisor's financial condition.
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- In conformance with Section 4 of the Illinois Franchise Disclosure Act, any provision in a franchise agreement that designates jurisdiction and venue in a forum outside of the State of Illinois is void. However a franchise agreement may provide for arbitration to take place outside of Illinois.
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- Your rights upon Termination and Non-Renewal are set forth in sections 19 and 20 of the Illinois Franchise Disclosure Act.
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- In conformance with section 41 of the Illinois Franchise Disclosure Act, any condition, stipulation or provision purporting to bind any person acquiring any franchise to waive compliance with the Illinois Franchise Disclosure Act or any other law of Illinois is void.
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- No statement, questionnaire or acknowledgement signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of: (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on behalf of the Franchisor. This provision supersedes any other term of any document executed in connection with the franchise.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION THE FRANCHISE RELATIONSHIP (FDD pages 42–50)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, franchisees in Illinois have a specific condition regarding the payment of initial franchise/development fees. The payment of these fees is deferred until Cinnaholic has fulfilled its initial obligations to the franchisee, and the franchisee has commenced business operations. This requirement was mandated by the Office of the Illinois Attorney General due to Cinnaholic's financial condition.
This condition provides a level of financial security for prospective Cinnaholic franchisees in Illinois. It ensures that franchisees are not required to pay the initial fees until Cinnaholic has met its pre-opening obligations, such as site selection assistance, training, and providing the necessary manuals and resources. This protects the franchisee's investment by aligning the payment of fees with the progress of establishing the business.
This type of fee deferral is not standard across all franchise systems, as initial fees are typically due upon signing the franchise agreement. The Illinois Attorney General's intervention highlights a specific risk factor related to Cinnaholic's financial stability at the time of the FDD's publication. Prospective franchisees should carefully consider this condition and conduct thorough due diligence into Cinnaholic's current financial health.
Furthermore, the addendum specifies that Illinois law governs the franchise agreement, and any provision designating jurisdiction and venue outside of Illinois is void, although arbitration may occur outside of the state. The addendum also states that franchisees cannot waive compliance with the Illinois Franchise Disclosure Act or any other Illinois law.