Which officer of Cinnaholic was alleged to have caused or benefitted from the distribution of proceeds from the sale of S&Q assets?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
In 2012, the United States Bankruptcy Trustee sued certain of our affiliates, officers, and directors as well as other defendants. The lawsuit claims there were fraudulent transfers, constructively fraudulent transfers, and wrongful distributions made in connection with the sale of one of our affiliates, The S&Q Shack, LLC ("S&Q"), to Edmonds Capital Fund I, LLC. The lawsuit further alleged that S&Q forgave the debts some of our "affiliates" may have owed S&Q. Specifically, the Complaint alleged our officer, Daryl Dollinger and the other defendants caused or benefitted from the distribution of the entire proceeds from the sale of the S&Q assets, thereby leaving no assets available to pay S&Q's creditors nor receivables that could be collected to pay S&Q's creditors. The lawsuit further claimed Martin Sprock authorized Daryl Dollinger to make wrongful distributions of the proceeds from the S&Q sale to RBI, Mr. Sprock, and other defendants. The lawsuit sought to recover the transfers made to ten defendants, on the grounds that the defendants did not take such amounts for value or in good faith. The lawsuit also sought to make Mr. Sprock personally liable for the amount of any "excess" in the distribution made to him. The Complaint further demanded that property be turned over to the bankruptcy estate by companies with which Mr. Dollinger was formerly affiliated and the other defendants.
Source: Item 3 — LITIGATION (FDD pages 9–11)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, in 2012, the United States Bankruptcy Trustee filed a lawsuit alleging fraudulent transfers related to the sale of The S&Q Shack, LLC. The complaint specifically named Daryl Dollinger, an officer of Cinnaholic, among other defendants.
The lawsuit alleged that Dollinger and other defendants caused or benefitted from the distribution of the entire proceeds from the sale of S&Q assets. This distribution allegedly left no assets to pay S&Q's creditors or receivables. The complaint also claimed that Martin Sprock authorized Dollinger to make wrongful distributions to RBI, Sprock, and other defendants.
The lawsuit sought to recover the transfers made to ten defendants, alleging they did not take the amounts for value or in good faith. It also sought to make Sprock personally liable for any "excess" in the distribution made to him. The case was eventually settled in November 2016, with a settlement agreement executed and approved in 2017, involving payments from Sprock and Seydel.