What is the requirement for Bound Parties of the Developer to sign and deliver Personal Covenants to Cinnaholic as a condition for the effectiveness of the Development Agreement?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
- 14.4. Personal Covenants of Certain Bound Parties. As a condition to the effectiveness of this Agreement, and at the time Developer delivers this signed Agreement to Franchisor, each Bound Party of Developer must sign and deliver to Franchisor the Personal Covenants attached hereto as Exhibit C (the "Personal Covenants"), agreeing to be bound personally by all the provisions of Sections 14.1, 14.2 and 14.3 hereof. If there are any changes in the identity of any such Bound Party while this Agreement is in effect, Developer must notify Franchisor promptly and make sure the new Bound Party signs and delivers to Franchisor the Personal Covenants.
Source: Item 23 — RECEIPT (FDD pages 62–269)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, as a condition for the effectiveness of the Development Agreement, each Bound Party of the Developer must sign and deliver Personal Covenants to Cinnaholic. These Personal Covenants are attached as Exhibit C to the Development Agreement. By signing these covenants, the Bound Parties agree to be personally bound by the provisions outlined in Sections 14.1, 14.2, and 14.3 of the Development Agreement. These sections likely pertain to restrictive covenants such as non-competition, non-solicitation, and confidentiality. If there are any changes in the identity of any Bound Party while the Development Agreement is in effect, the Developer must promptly notify Cinnaholic and ensure that the new Bound Party also signs and delivers the Personal Covenants.
This requirement ensures that individuals with a significant stake in the Development Agreement, such as shareholders, members, partners, managers, and their spouses, are personally responsible for upholding certain key obligations. This provides Cinnaholic with an additional layer of protection, as it can pursue legal action against these individuals directly if they violate the specified provisions. The Personal Covenants reinforce the importance of these obligations and demonstrate the commitment of the Bound Parties to the success and integrity of the Cinnaholic franchise system.
Prospective Cinnaholic developers should carefully review Exhibit C and Sections 14.1, 14.2, and 14.3 of the Development Agreement to fully understand the scope of the Personal Covenants and the obligations they impose on Bound Parties. It is important to identify all individuals who qualify as Bound Parties and ensure that they are willing to sign and comply with the Personal Covenants. Failure to comply with this requirement could delay or prevent the effectiveness of the Development Agreement.