Can Cinnaholic require Royalty Fees to be paid via automated bank draft?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
rom Gross Sales: (a) the amount of refunds, allowances or discounts to customers (including coupon sales) up to 10% of the Gross Sales, provided the related sales have previously been included in Gross Sales; and (b) the amount of any excise or sales tax levied upon retail sales and paid over to the appropriate governmental authority.
- 5.3. Automated Bank Draft. Franchisee understands and agrees that Franchisor reserves the right and may require, in its sole discretion, that all Royalty Fees, Advertising Fees, Advertising Cooperative (as defined below) contributions and other fees or contributions required to be paid to Franchisor or any Advertising Cooperative hereunder must be paid by automated bank draft or other reasonable means necessary to ensure payment of such fees are received by Franchisor or the appropriate Advertising Cooperative. Franchisee agrees to comply with Franchisor's payment instructions.
- 5.4. Late Payments and Insufficient Funds. All overdue payments for Royalty Fees, Advertising Fees and other fees required to be paid hereunder shall bear interest from the date due at the rate specified by Franchisor from time to time, up to the highest rate permitted by the law, but in no event shall such rate exceed 18% per annum. Interest shall accrue on all late payments regardless of whether Franchisor exercises its right to terminate this Agreement as provided for herein. In addition to its right to charge interest as provided herein, Franchisor may charge Franchisee a $100.00 late payment fee for all such overdue payments and a $100.00 insufficient funds fee for each check, automated bank draft payment, or other payment method that is not honored by Franchisee's financial institution. Franchisee acknowledges that Franchisor
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, Cinnaholic reserves the right to require that franchisees pay all Royalty Fees, Advertising Fees, Advertising Cooperative contributions, and other fees via automated bank draft or other reasonable means. This ensures that Cinnaholic receives payments. The franchisee must comply with Cinnaholic's payment instructions.
If a Cinnaholic franchisee makes late payments, the franchisee will have to pay interest. The interest rate is specified by Cinnaholic and will not exceed the highest rate permitted by law or 18% per annum. Interest accrues on all late payments, regardless of whether Cinnaholic chooses to terminate the Franchise Agreement. Cinnaholic may also charge a $100 late payment fee for overdue payments and a $100 insufficient funds fee for any payment method not honored by the franchisee's bank. Cinnaholic can also offset any amounts the franchisee owes against any amounts Cinnaholic may owe the franchisee.
Cinnaholic has the discretion to apply payments from the franchisee to any past due debts, regardless of any specific designation made by the franchisee. This means that even if a franchisee intends a payment to cover a current royalty fee, Cinnaholic can apply it to older outstanding debts first.