What is the purpose of the Development Fee paid to Cinnaholic?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
Upon the execution of this Agreement, Developer shall pay to Franchisor a development fee in an amount set forth on Exhibit A (the "Development Fee"). Developer acknowledges and agrees that the Development Fee is paid as consideration for Franchisor granting Developer the right to establish, open and operate the number of CINNAHOLIC® Bakeries set forth on the Development Schedule, and that the Development Fee is fully earned by Franchisor at the time this Agreement is signed and shall not be refundable for any reason. The Development Fee shall equal the total of all initial franchise fees (the "Franchise Fees") due under each of the Franchise Agreements covering the cumulative number of CINNAHOLIC® Bakeries to be developed hereunder. Provided that a Bakery is established in accordance with the Development Schedule, that portion of the Development Fee applicable to the Franchise Fee due under the Franchise Agreement for such Bakery shall be credited towards the payment of such Franchise Fee. In the event a Bakery is not established in accordance with the Development Schedule, that portion of the Development Fee that would have otherwise been credited towards the payment of the Franchise Fee shall be forfeited and retained by Franchisor. If for any reason this Agreement terminates before all or a portion of the Development Fee has been applied to the Franchise Fees, Franchisor will retain the unapplied portion of the Development Fee to compensate itself for its time, effort and foregone opportunities.
Source: Item 23 — RECEIPT (FDD pages 62–269)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, the Development Fee is paid by the Developer to Cinnaholic as consideration for granting the Developer the right to establish, open, and operate a specified number of Cinnaholic bakeries according to the Development Schedule. This fee is considered fully earned by Cinnaholic upon signing the agreement and is non-refundable. The Development Fee equals the total of all initial franchise fees due under each of the Franchise Agreements covering the number of Cinnaholic bakeries to be developed.
If a Cinnaholic bakery is established according to the Development Schedule, the portion of the Development Fee applicable to the Franchise Fee for that bakery will be credited towards the payment of that Franchise Fee. However, if a bakery is not established as scheduled, the corresponding portion of the Development Fee is forfeited and retained by Cinnaholic. Should the agreement terminate before the entire Development Fee is applied to Franchise Fees, Cinnaholic will retain the unapplied portion to compensate for their time, effort, and lost opportunities.
In practical terms, this means a prospective Cinnaholic franchisee who signs a multi-unit development agreement pays a Development Fee upfront, which is essentially a pre-payment of the franchise fees for each location. This secures the right to develop multiple units within a specific timeframe. The risk for the franchisee is that failure to open locations on schedule results in forfeiting portions of the Development Fee, while Cinnaholic retains the funds to offset their initial investment in setting up the franchise agreement.