What happens if a Cinnaholic franchisee files for bankruptcy?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
rts to cure such breach, Franchisor shall be given an additional 60 day period to cure the same, and this Agreement shall not terminate. In the event of termination by Franchisee, all post-termination obligations of Franchisee described herein shall not be waived but shall be strictly adhered to by Franchisee.
- 21.2. Termination by Franchisor without a Cure Period. Franchisor may immediately terminate this Agreement upon written notice to Franchisee, without opportunity to cure, if:
- (i) Franchisee files a petition under any bankruptcy or reorganization law, becomes insolvent, or has a trustee or receiver appointed by a court of competent jurisdiction for all or any part of its property;
- (ii) Following commencement of the operation of the Bakery, Franchisee ceases to operate the Bakery at the Franchised Site;
- (iii) Franchisee seeks to effect a plan of liquidation, reorganization, composition or arrangement of its affairs, whether or not the same shall be subsequently approved by a court of competent jurisdiction;
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, if a franchisee files a petition under any bankruptcy or reorganization law, becomes insolvent, or has a trustee or receiver appointed for their property, Cinnaholic has the right to immediately terminate the franchise agreement without providing an opportunity to cure the breach. This means Cinnaholic can end the agreement as soon as they provide written notice.
Additionally, if a franchisee seeks to effect a plan of liquidation, reorganization, composition, or arrangement of its affairs, the franchise agreement or any right or interest is not considered an asset in any insolvency, receivership, bankruptcy, composition, liquidation, arrangement, or reorganization proceeding. Furthermore, if an involuntary proceeding is filed against the franchisee under any bankruptcy, reorganization, or similar law and is not dismissed within 60 days, Cinnaholic can immediately terminate the agreement.
These terms are fairly standard in franchising, as franchisors want to protect their brand and system from the uncertainties and potential damage associated with a franchisee's bankruptcy. The immediate termination clause is particularly important, as it allows Cinnaholic to quickly regain control of the location and prevent further financial deterioration or damage to the brand's reputation. Prospective franchisees should carefully consider these implications and ensure they have a solid financial plan to avoid such situations.