If a Cinnaholic developer files for bankruptcy, can Cinnaholic immediately terminate the Development Agreement?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor may immediately terminate this Agreement upon written notice to Developer, without opportunity to cure, if:
(i) Developer 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) Developer 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; it being understood that in no event shall this Agreement or any right or interest hereunder be deemed an asset in any insolvency, receivership, bankruptcy, composition, liquidation, arrangement or reorganization proceeding;
Source: Item 23 — RECEIPT (FDD pages 62–269)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, Cinnaholic can immediately terminate the Development Agreement with written notice if the developer files for bankruptcy. This is without providing an opportunity for the developer to cure the situation. This condition is in place to protect Cinnaholic's interests in cases where the developer's financial stability is severely compromised.
Specifically, Cinnaholic can terminate the agreement immediately if the developer files a petition under any bankruptcy or reorganization law, becomes insolvent, or has a trustee or receiver appointed by a court for any part of their property. Additionally, Cinnaholic can terminate the agreement if the developer seeks to implement a plan for liquidation, reorganization, or arrangement of their affairs, regardless of whether a court approves it. The agreement clarifies that the Development Agreement itself is not considered an asset in any insolvency, receivership, bankruptcy, composition, liquidation, arrangement, or reorganization proceeding.
This clause is a standard protective measure in franchising. It allows Cinnaholic to sever ties with a developer facing severe financial distress to mitigate potential damage to the brand and the network of franchisees. Prospective developers should understand that filing for bankruptcy can lead to immediate termination of their development rights without a chance to rectify the situation.