Does Cinnaholic receive payments or other benefits from authorized suppliers based on franchisee dealings?

According to Cinnaholic's 2025 Franchise Disclosure Document, Cinnaholic and its affiliates have the right to receive payments or other benefits, such as rebates, discounts, and allowances, from authorized suppliers based on their dealings with franchisees. Cinnaholic may use these funds without restriction for any purpose they deem appropriate. These payments from suppliers are often based on the quantity of products purchased from them by the Cinnaholic franchise system, typically calculated per case or per pound. Cinnaholic may also receive fees from a supplier as a condition of approving that supplier. For the fiscal year ended December 31, 2024, Cinnaholic received $3,735 in rebates from Fun Express, $22,000 in rebates from Ventura Foods, and $6,523 in rebates from Saebert.

This arrangement is common in franchising, where franchisors negotiate with suppliers to secure better pricing or rebates due to the collective buying power of the franchise network. These benefits can be used to support the franchise system, such as contributing to the marketing fund or offsetting other costs. However, the FDD states that Cinnaholic does not provide material benefits to franchisees, such as renewal or granting additional franchises, based on their use of designated or approved suppliers.

Prospective franchisees should be aware that Cinnaholic may profit from these supplier arrangements. While this is not inherently negative, it's important to understand that Cinnaholic's interests may be aligned with maximizing these revenues, which could influence their choice of approved suppliers. Franchisees are required to purchase food products, supplies, ingredients, equipment, furnishings, employee uniforms, fixtures, inventory, paper products, and packaging from suppliers designated or approved in writing by Cinnaholic. Cinnaholic estimates that purchases and leases made from designated or approved suppliers represent approximately 90% of the total cost of operating a Cinnaholic Bakery.

Cinnaholic may also designate a vendor(s) to provide food brokerage services to the Cinnaholic franchise system and such vendor(s) may receive, directly or indirectly, revenue from suppliers based on purchases by Cinnaholic franchisees. The revenue may be based on volume or per unit sales. Cinnaholic does derive revenue, directly or indirectly, that they retain as a profit from suppliers in connection with the services or products they provide to their franchisees.