What happens if a Cinnaholic franchisee makes an unauthorized transfer of the agreement?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
- (xii) Franchisee makes an unauthorized Transfer of this Agreement, the franchise, the Bakery, or an ownership interest in Franchisee;
Franchisee shall not subfranchise, sell, assign, transfer, merge, convey or encumber (each, a "Transfer"), the Bakery, the Franchised Site, this Agreement or any of its rights or obligations hereunder, or suffer or permit any such Transfer of the Bakery, the Franchised Site, this Agreement or its rights or obligations hereunder to occur by operation of law or otherwise without the prior express written consent of Franchisor.
In addition, if Franchisee is a corporation, limited liability company, partnership, business trust, or similar association or entity, the shareholders, members, partners, beneficiaries, investors or other equity holders, as the case may be, may not Transfer their equity interests in such corporation, limited liability company, partnership, business trust, or similar association or entity, without the prior written consent of Franchisor.
Furthermore, in the event that any shareholder, member, partner, investor or other equity holder of Franchisee (the "Equity Holder") is a corporation, limited liability company, partnership, business trust, or similar association or entity, the interests of the shareholders, members, partners, beneficiaries, investors or other equity holders, as the case may be, in such Equity Holder, may not be Transferred, without the prior written consent of Franchisor.
Franchisor will not unreasonably withhold consent to a Transfer provided the requirements of Section 19.4 have been satisfied.
Any Transfer in violation of this Section shall be void and of no force and effect.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, if a franchisee makes an unauthorized transfer of the franchise agreement, the franchise, the bakery, or an ownership interest in the franchisee entity, it constitutes a breach of the agreement. Specifically, the agreement states that the franchisee cannot subfranchise, sell, assign, transfer, merge, convey, or encumber the bakery, the franchised site, the agreement itself, or any rights or obligations under it without Cinnaholic's prior express written consent. This restriction extends to transfers occurring by operation of law or otherwise.
Furthermore, if the franchisee is a corporation, limited liability company, partnership, business trust, or similar entity, the equity holders (shareholders, members, partners, etc.) also cannot transfer their equity interests without Cinnaholic's prior written consent. This requirement extends further down, such that if an equity holder is itself an entity, the interests in that entity cannot be transferred without Cinnaholic's approval. Cinnaholic agrees that it will not unreasonably withhold consent to a transfer, provided that the requirements outlined in Section 19.4 of the franchise agreement are met.
The consequence of an unauthorized transfer is that it will be considered void and of no force and effect. This means that Cinnaholic does not recognize the transfer, and the original franchisee remains responsible for fulfilling the obligations under the franchise agreement. This provision is designed to ensure that Cinnaholic maintains control over who operates its franchises and that any new operators meet its standards and qualifications. Prospective franchisees should carefully review Section 19.4 to understand the requirements for obtaining Cinnaholic's consent to a transfer.