Does Cinnaholic have the right to set-off amounts owed by the franchisee against amounts Cinnaholic may owe the franchisee?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
. Upon the expiration or termination of this Agreement for any reason, Franchisee must return all copies of the Operations Manual to Franchisor, and upon Franchisor's request, certify to Franchisor that Franchisee has not kept any copies in any medium. The Operations Manual is confidential, copyrighted and Franchisor's exclusive property.
Franchisor may impose fines for Franchisee's failure to comply with the Operations Manual. Before any fine may be imposed, Franchisor must first have given Franchisee one written notice of the non-compliance with the Operations Manual; thereafter, any further non-compliance with that specific provision of the Operations Manual shall allow the imposition of a fine. Fines shall be in the amount of $100 to $1000, per violation, per day, as determined in Franchisor's sole discretion. However, Franchisor may elect to provide guidance in the Operations Manual regarding the amount of fines it may levy for given acts of noncompliance.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
Based on the 2025 Cinnaholic Franchise Disclosure Document, there is no explicit mention of Cinnaholic's right to set off amounts owed by the franchisee against amounts Cinnaholic may owe the franchisee. However, the document does state that Cinnaholic may cause an electronic funds transfer from the franchisee's bank account for the amount of any fines levied for non-compliance with the Operations Manual.
Item 22 of the FDD discusses various aspects of the franchise agreement but does not specifically address set-off rights. The agreement outlines payment obligations for fees, advertising expenses, and taxes, as well as potential fines for non-compliance. It also details the franchisee's obligations upon termination or expiration of the agreement.
Without a specific clause addressing set-off rights, it is unclear whether Cinnaholic can offset debts. A prospective franchisee should seek clarification from Cinnaholic regarding their policy on set-off rights to fully understand their financial obligations and rights under the franchise agreement. It would be prudent to consult with a legal professional to review the franchise agreement and understand the implications of any potential set-off rights.