What happens if a Cinnaholic franchisee abandons the bakery; what obligations arise?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
overnmental authority having jurisdiction over this Agreement limit Franchisee's ability to pay, and Franchisor's ability to receive, such liquidated damages, Franchisee shall be liable to Franchisor for any and all damages which it incurs, now or in the future, as a result of Franchisee's default under this Agreement.
22.2. Obligations upon Termination or Expiration. Upon the termination or expiration of this Agreement, whether by reason of lapse of time, default in performance, abandonment of the Bakery or other cause or contingency, Franchisee shall:
- (i) forthwith return to Franchisor all material furnished by Franchisor containing confidential information, operating instructions, business practices, or methods or procedures, including, without limitation, the Operations Manual;
- (ii) discontinue at the Franchised Site all use of the Marks, and the use of any and all signs, products, paper goods and other items bearing the Marks. Any signs containing the Marks which Franchisee is unable to remove within one day of the termination or expiration of this Agreement shall be completely covered by Franchisee until the time of their removal which shall be within 10 days of termination or expiration of this Agreement;
- (iii) if Franchisee retains possession of the Franchised Site, at Franchisee's expense, make such reasonable modifications to the exterior and interior décor of the Bakery and the Franchised Site as Franchisor requires to eliminate its identification as a CINNAHOLIC® Bakery and to avoid violation of the non-compete provision;
- (iv) refrain from operating or doing business under any name or in any manner that may give the general public the impression that this Agreement is still in force or that Franchisee is connected in any way with Franchisor or that Franchisee has the right to use the CINNAHOLIC® System or the Marks;
- (v) refrain from making use of or availing itself to any of the confidential information, Operations Manual or other information received from Franchisor or disclosing or revealing any the same in violation of Section 20.3 hereof;
- (vi) take such action as may be required to cancel all assumed names or equivalent registrations relating to the use of any Mark;
- (vii) assign to Franchisor or its designee all of Franchisee's rights, title, and interest in the telephone numbers, telephone directory listings and advertisements, website URLs (whether acquired by Franchisee in accordance with or in violation of Section 15.2 hereof), e-mail addresses, store leases and governmental licenses or permits used for the operation of the Bakery. Simultaneously with Franchisee's execution of this Agreement, Franchisee will execute the Internet Web Sites and Listings Agreement attached hereto as Exhibit C and the Telephone Listing Agreement attached hereto as Exhibit D; and
- (viii) strictly comply with the terms and conditions of Section 20 above and any other procedures in the Operations Manual that are established by Franchisor related to discontinuing operations of the Bakery.
If Franchisee fails to modify the exterior and interior décor of the Bakery and the Franchised Site as Franchisor requires to eliminate its identification as a CINNAHOLIC® Bakery (including the removal of all signs bearing the Marks), Franchisor may take such action to modify the exterior and interior décor of the Bakery and the Franchised Site and charge Franchisee for cost of such action. Franchisee shall immediately pay Franchisor for the cost of any action taken by Franchisor to modify the exterior and interior décor of the Bakery and the Franchised Site.
22.3. Sale upon Expiration or Termination.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, if a franchisee abandons their bakery, several obligations are triggered. Upon abandonment, the franchisee must immediately return all confidential materials provided by Cinnaholic, including the Operations Manual. They must also discontinue all use of Cinnaholic's trademarks and remove or cover any signs, products, or items bearing those marks.
Additionally, if the franchisee retains possession of the franchised site, they are responsible for making modifications to the exterior and interior of the bakery to eliminate its identification as a Cinnaholic location. This includes changes to décor to avoid violating the non-compete agreement. The franchisee must also refrain from operating under any name or manner that could mislead the public into thinking the franchise agreement is still in effect or that they are still connected with Cinnaholic.
Furthermore, Cinnaholic outlines that if the franchise agreement is terminated due to the franchisee's default, which could include abandonment, the franchisee must pay liquidated damages. These damages are calculated based on the average annual royalty fees from the two years preceding termination, multiplied by two. If the bakery has been open for less than two years, the calculation uses the average monthly royalty fees multiplied by 12. If the remaining term of the franchise agreement is less than two years, the calculation is adjusted to reflect the number of years remaining. This liquidated damages clause is designed to compensate Cinnaholic for losses such as lost royalty fees, market penetration, and the cost of finding a new franchisee for the territory.