What happens to the Cinnaholic Development Agreement if a Franchise Agreement is terminated?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
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Franchise Agreement
| Provision | Section in Franchise Agreement | Summary | |
|---|---|---|---|
| a. | Length of the franchise term | Section 2.1 | 10 years |
| b. | Renewal or extension of the term | Section 2.2 | If you meet the requirements, you can renew for one additional consecutive 10 year term; after that you will have no right to renew the Franchise Agreement. |
| c. | Requirements for franchisee to renew or extend | Section 2.2 | You must: provide written notice of election to renew; not be in default of the Franchise Agreement or any other agreement relating to the Bakery; sign the then-current form of Franchise Agreement; pay a renewal fee; refurbish the Bakery, if required; complete any required retraining program; sign the current form of general release in Exhibit J to this Disclosure Document; and maintain ownership or leasehold interest in the Bakery location or secure a suitable alternative. Terms of the then-current form of Franchise Agreement may differ materially from any and all of those contained in the Franchise Agreement attached to this Disclosure Document. |
| d. | Termination by franchisee | Section 21.1 | You can terminate only if we fail to cure a default under the Franchise Agreement within 90 days (or 150 days in some instances) after you give us written notice of termination. |
| e. | Termination by franchisor without cause | Not Applicable | Not Applicable. Termination of the Development Agreement does not allow for the termination of any then in force Franchise Agreement. Termination of any Franchise Agreement does not allow for termination of the Development Agreement, so long as Franchisee is otherwise in compliance with its development schedule. |
| f. | Termination by franchisor with cause | Sections 21.2 and 21.3 | We can terminate only if you default or if certain events (described in (g) and (h) below) occur. In some instances, you will have an opportunity to cure the default. Termination of the Development Agreement does not allow for the termination of any then in force Franchise Agreement. Termination of any Franchise Agreement does not allow for termination of the Development Agreement, so long as Franchisee is otherwise in compliance with its development schedule. |
| g. "Cause" defined – curable defaults | Section 21.3 | Failure to comply with our standards and procedures or any term of the Franchise Agreement not covered in "h" below, including: failure to submit required reports; failure to relocate; failure to comply with any of the terms and conditions of any other agreement entered into by you in connection with your Bakery; failure to maintain required insurance; and failure to restore Bakery to full operation if it is rendered inoperable by casualty. You have 30 days (or 60 days in some instances) after we give you written notice to cure the default. Termination of the Development Agreement does not allow for the termination of any then in force Franchise Agreement. Termination of any Franchise Agreement does not allow for termination of the Development Agreement, so long as Franchisee is otherwise in compliance with its development schedule. | |
| h. |
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, the termination of any Franchise Agreement does not automatically lead to the termination of the Development Agreement. The Development Agreement remains in effect as long as the franchisee is otherwise in compliance with its development schedule. This means that even if a specific Cinnaholic franchise location ceases operation due to termination, the franchisee's broader obligations and rights under the Development Agreement to open other locations are not necessarily affected.
This provision offers a degree of security for Cinnaholic franchisees who have committed to developing multiple units. If one location fails, the franchisee can continue developing other locations as planned, provided they adhere to the development schedule outlined in the Development Agreement. This allows franchisees to mitigate risk and continue expanding their Cinnaholic business even if one store underperforms or faces unforeseen circumstances.
However, it's crucial for prospective Cinnaholic franchisees to understand the specific terms of the Development Agreement, particularly the development schedule and compliance requirements. Failure to meet these requirements could still jeopardize the Development Agreement, even if a Franchise Agreement is terminated. Franchisees should also clarify what constitutes compliance with the development schedule and what remedies Cinnaholic has if the schedule is not met.
This arrangement is somewhat typical in multi-unit franchising, where franchisors want to ensure continued expansion while providing developers some flexibility if individual locations struggle. The Cinnaholic franchisee needs to carefully review the Development Agreement alongside the Franchise Agreement to fully grasp their obligations and rights under both contracts.