In Maryland, what is deferred until the first franchise under the development agreement opens for a Cinnaholic franchise?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
Based upon the franchisor's financial condition, the Maryland Securities Commissioner has required a financial assurance. Therefore, all initial fees and payments owed by franchisees shall be deferred until the franchisor completes its pre-opening obligations under the franchise agreement. In addition, all development fees and initial payments by area developers shall be deferred until the first franchise under the development agreement opens Item 17 of this Disclosure Document is modified as follows:
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 27–35)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, in the state of Maryland, both development fees and initial payments by area developers are deferred. This deferral lasts until the first Cinnaholic franchise under the development agreement commences operations.
This addendum required by the Maryland Securities Commissioner is based on Cinnaholic's financial condition. The deferral of fees and payments provides a level of financial protection for area developers in Maryland. It ensures that developers are not required to pay these fees until a Cinnaholic franchise location is actually open and operating under their development agreement.
This type of financial assurance is not universally required across all states, indicating that Cinnaholic's financial condition triggered this requirement in Maryland. Prospective area developers in Maryland should understand that while they won't have to pay development fees and initial payments upfront, these payments will become due once the first franchise location opens. This could impact their initial cash flow planning and overall investment strategy.