Does Cinnaholic have an obligation to reimburse franchisees for costs incurred due to mandatory participation in special promotional programs?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
- (xvi) Participate in all national, regional or local advertising and promotional activities Franchisor requires.
Franchisee understands that Franchisor implements promotions such as discount coupons, certificates, frequent customer cards, special menu promotions, gift cards and other activities intended to enhance customer awareness and build traffic at CINNAHOLIC® Bakeries on a national, regional or local level.
Franchisor may establish procedures and regulations related to these promotions in the Operations Manual and Franchisee agrees to honor and participate in these programs in accordance with such procedures and regulations specified by Franchisor in the Operations Manual or otherwise in writing.
Franchisee understands that its participation in these programs is essential to its success and that its participation may entail some cost to Franchisee.
Franchisee agrees that Franchisor has no obligation to reimburse Franchisee for any costs it incurs due to its mandatory participation in these special promotional programs.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, franchisees are required to participate in national, regional, and local advertising and promotional activities as mandated by Cinnaholic. These activities may include discount coupons, certificates, frequent customer cards, special menu promotions, and gift cards. While Cinnaholic implements these promotions to enhance customer awareness and build traffic, franchisees are responsible for the costs associated with their participation.
The FDD explicitly states that Cinnaholic has no obligation to reimburse franchisees for any costs incurred due to their mandatory participation in these special promotional programs. This means that franchisees must factor in the expenses of these promotions when budgeting and planning their business operations. These costs can include, but are not limited to, the expenses of honoring coupons, food costs for sales promotions, and other related expenses.
This policy is fairly common in the franchise industry, where franchisees often contribute to marketing efforts without direct reimbursement for specific promotional costs. Prospective Cinnaholic franchisees should carefully consider these potential expenses and their impact on profitability. It is important to review the Operations Manual and any other written communications from Cinnaholic to fully understand the scope and requirements of these promotional programs and their associated costs.