If Cinnaholic becomes a designated supplier, can they charge a mark-up on items purchased by Cinnaholic franchisees?

According to Cinnaholic's 2025 Franchise Disclosure Document, Cinnaholic has the right to designate itself or its affiliates as approved suppliers, or even the sole supplier, for various items needed to operate a Cinnaholic bakery. If Cinnaholic does become a designated supplier, franchisees would be required to purchase those items directly from Cinnaholic or its affiliate at their current prices. This gives Cinnaholic significant control over the supply chain and product quality within its franchise system.

Specifically, the FDD states that if Cinnaholic becomes a designated supplier, it may charge franchisees a reasonable mark-up, surcharge, and handling fee on any items purchased from them. This means that the price franchisees pay for supplies could include a profit margin for Cinnaholic. This is a common practice in franchising, where franchisors often derive revenue from the sale of goods and services to their franchisees, in addition to the initial franchise fee and ongoing royalties.

Prospective franchisees should be aware that Cinnaholic's ability to become a designated supplier and charge markups could impact their operating costs and profitability. While the markup is described as 'reasonable,' it's important for franchisees to understand how these costs will be determined and managed. Franchisees should inquire about the potential range of markups and how they compare to market prices for similar goods and services from other suppliers. Understanding these potential costs is crucial for assessing the overall financial viability of a Cinnaholic franchise.