Is the territorial protection granted to the Cinnaholic Franchisee exclusive, and where is the Franchise Territory specified?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
- 3.2. Territorial Protection. Franchisor will not establish for itself or grant a franchise to any other party to establish a Bakery within the territory specified on Exhibit A attached hereto (the "Franchise Territory"). Notwithstanding anything herein to the contrary, if any disagreement arises regarding the area comprising the Franchise Territory, then Franchisor's decision as to the definition of the Franchise Territory shall be final and binding. Except as expressly provided in the first sentence of this Section 3.2, Franchisee acknowledges that the franchise granted under this Agreement is non-exclusive and Franchisee has no territorial protection and Franchisee has no right to exclude, control or impose conditions on the location or development of other or future franchises under the Marks, or on any sales or distribution of products under the Marks or other business activities of Franchisor or any other party licensed to use the Marks.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, the rights granted to a franchisee are non-exclusive, meaning Cinnaholic retains significant control over territory and distribution. While Cinnaholic will not establish a bakery or grant a franchise to another party within the Franchise Territory outlined in Exhibit A, this protection has limitations.
The Franchise Territory is specified on Exhibit A of the Franchise Agreement. However, Cinnaholic retains the right to operate or franchise other businesses, including Cinnaholic bakeries at destination locations like airports, stadiums, malls, and universities, even within the Franchise Territory. They can also sell products through other channels like grocery stores, the internet, and delivery services within the territory without compensating the franchisee, as long as these sales do not originate from another Cinnaholic bakery within the Franchise Territory.
Furthermore, if any disagreement arises regarding the area that comprises the Franchise Territory, Cinnaholic's decision on the definition of the Franchise Territory will be final and binding. This indicates that while a territory is defined, Cinnaholic has considerable latitude in interpreting and modifying it, which could impact a franchisee's business. The franchisee also has no right to impose conditions on the location or development of other franchises.