During the term of the Cinnaholic agreement, can the Developer's spouse have a direct or indirect interest in a Competitive Business, regardless of location?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
een declined in the manner therein set forth; and
- (viii) the Marks not being used in any advertising for any Transfer prohibited by Sections 13.2 and 13.3 hereof.
- 13.5. Removal of General Partner. If Developer is a limited partnership, Developer may not remove or appoint, or permit the limited partners to remove or appoint, a new or successor general partner without the prior written consent of Franchisor (even if such appointment is due to the resignation, death or disability of the General Partner).
14. RESTRICTIVE COVENANTS
14.1. Covenants Not to Compete.
(i) Non-Competition During Term. In addition to and not in limitation of any other restrictions on Developer contained herein, Developer and Developer's spouse, and, if Developer is not an individual, its shareholders, members, partners and managers, as applicable, and their spouses (each, a "Bound Party"), agree that they will not, during the term of this Agreement, directly or indirectly, for and on behalf of itself, himself, herself or any other person or entity, (a) have any direct or indirect interest as a disclosed or beneficial owner in a Competitive Business (as defined below), regardless of location or (b) perform services as a director, officer, manager, employee, consultant, representative, agent, or otherwise for a Competitive Business, regardless of location.
(ii) Post-Term Non-Competition. In addition to and not in limitation of any other restrictions on Developer contained herein, Developer and the Bound Parties agree that they will not, for one year following the effective date of termination or expiration of this Agreement for any reason, or following the date of a Transfer by Developer, directly or indirectly, for and on behalf of itself, himself, herself or any other person or entity, (a) have any direct or indirect interest as a disclosed or beneficial owner in a Competitive Business or (b) perform services as a director, officer, manager, employee, consultant, representative, agent, or otherwise for a Competitive Business which, in either case, is located or operating within a five mile radius of any CINNAHOLIC® Bakery.
(iii) General. For purposes of this Agreement, the term "Competitive Business" means any business operating, or granting franchises or licenses to others to operate, a bakery or other food service business (a) engaged in the retail or wholesale production or sale of baked goods (including, but not limited to, all cinnamon rolls and other baked goods) and (b) that derives more than 50% of its revenue from sales of cinnamon rolls (other than another CINNAHOLIC® Bakery operated by Developer under license from Franchisor).
Source: Item 23 — RECEIPT (FDD pages 62–269)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, during the term of the agreement, the developer's spouse is restricted from having a direct or indirect interest in a Competitive Business, regardless of its location. This restriction is part of the non-competition covenants outlined in the agreement. A "Bound Party" which includes the developer's spouse, agrees not to have any direct or indirect interest as a disclosed or beneficial owner in a Competitive Business, or perform services for one, regardless of location.
A "Competitive Business" is defined as any business operating a bakery or food service that derives more than 50% of its revenue from cinnamon rolls or other baked goods. However, the developer's spouse is not prohibited from owning securities in a Competitive Business if they are listed on a stock exchange or traded over-the-counter and represent 5% or less of the outstanding shares.
These covenants acknowledge that the developer and their spouse will gain knowledge of Cinnaholic's business and operating methods, including confidential information. The disclosure or use of this information would harm Cinnaholic and its franchisees. Cinnaholic can seek injunctive relief to enforce these covenants, and the developer waives the need for Cinnaholic to post a bond or security for such relief.
This non-compete clause is a fairly standard practice in franchising to protect the brand and prevent franchisees from using proprietary knowledge to compete, either directly or through family members. Prospective franchisees should carefully consider these restrictions and ensure they do not conflict with their spouse's current or future business interests.