Can Cinnaholic require a Cinnaholic franchisee to purchase exclusively from a designated supplier?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
TIONS ON SOURCES OF PRODUCTS AND SERVICES
Except as described below, you are not obligated to purchase or lease from us, our designees or suppliers approved by us, or under our specifications, any goods, services, supplies, fixtures, equipment, inventory, computer hardware and software, or real estate relating to operating your Bakery. To ensure a uniform image and quality of products and services throughout CINNAHOLIC® franchise system, all food products, supplies, ingredients, equipment, furnishings, employee uniforms, fixtures, inventory, paper products, packaging, and other items used, sold, displayed or distributed in your Bakery (i) must comply with our standards and specifications and (ii) from suppliers designated or approved in writing by us. We may designate at any time and for any reason, a single or multiple suppliers for these items and require you to purchase exclusively from the designated supplier or suppliers, which exclusive designated supplier(s) may be us or an affiliate of ours. Currently, we do not intend to be, or to appoint any of our affiliates as, an authorized supplier of any products, supplies, equipment, or other items used in the operation of the Bakery. However, we reserve the right to designate ourselves and/or any of our affiliates as an approved supplier in the future, and we may even designate ourselves or an affiliate as the sole supplier of one or more items, in which case, you would have to buy the item from us or our affiliate at our or their then-current price. Our Operations Manual and other communications will identify our standards and specifications and the names of approved or designated suppliers. If we become a designated supplier, we may charge you a reasonable mark-up, surcharge, and handling fee on any items you purchase from us. Monies you pay to us will include a profit for us. We 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. There are no approved suppliers in which any of our officers own an interest. We do derive revenue, directly or indirectly, that we retain as a profit from suppliers in connection with the services or products they provide to our franchisees.
We and our affiliates have the right to receive payments or other benefits like rebates, discounts, and allowances from authorized suppliers based upon their dealings with you and other franchisees and we may use the monies we receive without restriction for any purpose we deem appropriate or necessary. Additionally, we have received rebates from various suppliers which we have placed directly into our Marketing Fund. Suppliers may pay us based upon the quantities of products the CINNAHOLIC® franchise system purchases from them. These fees will usually be based upon an amount per case or an amount per pound. We may receive fees from a supplier as a condition of our approval of that supplier. We do not provide material benefits to franchisees (for example, renewal of existing or granting additional franchises) based on their use of designated or approved suppliers. For the fiscal year ended December 31, 2024, we received $3,735 in rebates from Fun Express, $22,000 in rebates from Ventura Foods, and $6,523 in rebates from Saebert.
We may, when appropriate, negotiate purchase arrangements, including price terms, with designated and approved suppliers on behalf of the System. Some of our current approved suppliers include Sysco Foods and Tom Tedrow Architects. We may negotiate supply arrangements with suppliers for the benefit of franchisees. While we are currently developing several such arrangements, none have yet been finalized. We have not currently, but we may in the future, negotiate supply arrangements with suppliers for the benefit of franchisees. There are no approved suppliers in which any of our officers own an interest. We have negotiated price terms with some suppliers. In the future, there may be various vendors and suppliers that contribute to the cost of the annual convention for CINNAHOLIC® franchise system (the "Convention"). Monies from vendors and suppliers that are used to pay for the cost of the Convention will not be revenue to us.
During the fiscal year ended December 31, 2024, neither we, nor our affiliates, received any revenues from required purchases and leases.
Site Approval and Construction. We must approve the site for your Bakery and the site must meet our then-current site criteria.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 21–25)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, franchisees may be required to purchase exclusively from designated suppliers. To ensure uniformity and quality across the Cinnaholic franchise system, all food products, supplies, ingredients, equipment, furnishings, employee uniforms, fixtures, inventory, paper products, packaging, and other items used in the bakery must meet Cinnaholic's standards and specifications and come from suppliers that Cinnaholic designates or approves in writing. Cinnaholic can designate single or multiple suppliers for these items and require franchisees to purchase exclusively from them. These exclusive suppliers may include Cinnaholic itself or its affiliates.
Currently, Cinnaholic does not intend to be or appoint its affiliates as authorized suppliers, but it reserves the right to do so in the future. If Cinnaholic or an affiliate becomes the sole supplier for certain items, franchisees would be required to purchase those items directly from them at the then-current price. The Operations Manual and other communications will outline the standards, specifications, and names of approved or designated suppliers. If Cinnaholic becomes a designated supplier, it may charge a reasonable markup, surcharge, and handling fee on items purchased from them, which would include a profit for Cinnaholic.
If a franchisee wishes to purchase items from a non-approved supplier or items that do not meet Cinnaholic's standards, they must submit a written request for approval, provided that the item has not been designated to be exclusively supplied by a designated supplier. The proposed supplier must provide financial and operational information and allow Cinnaholic to inspect its facilities. The franchisee or the proposed supplier must pay a fee for any evaluation, testing, and inspections. Cinnaholic will notify the franchisee of its decision within approximately 45 days after receiving the completed request and completing any evaluations, inspections, or testing, but generally will respond within 90 days. Cinnaholic is not obligated to approve any supplier or item that does not meet its standards.