If Cinnaholic becomes a designated supplier, does the money paid by Cinnaholic franchisees include a profit for Cinnaholic?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
If we become a designated supplier, we may charge you a reasonable mark-up, surcharge, and handling fee on any items you purchase from us. Monies you pay to us will include a profit for us. We may also designate a vendor(s) to provide food brokerage services to the CINNAHOLIC® franchise system and such vendor(s) may receive, directly or indirectly, revenue from suppliers based on purchases by CINNAHOLIC® franchisees. The revenue may be based on volume or per unit sales. There are no approved suppliers in which any of our officers own an interest. We do derive revenue, directly or indirectly, that we retain as a profit from suppliers in connection with the services or products they provide to our franchisees.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 21–25)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, if Cinnaholic becomes a designated supplier, the monies franchisees pay to Cinnaholic will include a profit for Cinnaholic. Cinnaholic retains the right to designate itself or its affiliates as approved or sole suppliers for certain items. If Cinnaholic or an affiliate becomes the sole supplier, franchisees must purchase the item from them at the then-current price.
Cinnaholic also has the right to receive payments or other benefits, such as rebates, discounts, and allowances, from authorized suppliers based on their dealings with franchisees. These funds can be used by Cinnaholic without restriction for any purpose they deem appropriate. For example, during the fiscal year ended December 31, 2024, Cinnaholic received $3,735 in rebates from Fun Express, $22,000 in rebates from Ventura Foods, and $6,523 in rebates from Saebert.
These supplier relationships and potential markups could impact a franchisee's costs. The FDD estimates that purchases from designated or approved suppliers, or according to Cinnaholic's standards and specifications, account for 80% or more of the total cost of establishing a Cinnaholic bakery and approximately 90% of the total cost of operating the bakery. Therefore, any changes in supplier arrangements or the designation of Cinnaholic as a supplier could significantly affect a franchisee's profitability.