What is the timeframe for dismissing an involuntary bankruptcy proceeding against a Cinnaholic franchisee to avoid termination?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor may immediately terminate this Agreement upon written notice to Franchisee, without opportunity to cure, if:
- (iv) Franchisee has an involuntary proceeding filed against it under any bankruptcy, reorganization, or similar law and such proceeding is not dismissed within 60 days thereafter;
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, a franchisee has 60 days to dismiss an involuntary bankruptcy proceeding filed against them. If the franchisee fails to dismiss the proceeding within this timeframe, Cinnaholic has the right to terminate the Franchise Agreement immediately without allowing an opportunity to cure the breach.
This clause protects Cinnaholic from potential financial and operational instability caused by a franchisee's bankruptcy. Bankruptcy proceedings can disrupt the operation of a Cinnaholic location and negatively impact the brand's reputation. By setting a 60-day limit for dismissal, Cinnaholic aims to ensure swift resolution of financial issues or to sever ties with a franchisee facing severe financial distress.
For a prospective Cinnaholic franchisee, this means that they must address any involuntary bankruptcy filings promptly. Securing legal and financial advice to resolve the situation within 60 days is crucial to avoid losing the franchise. This requirement underscores the importance of maintaining a solid financial footing and having contingency plans in place to manage financial challenges.
It is important to note that this termination clause applies specifically to involuntary bankruptcy proceedings. If a Cinnaholic franchisee voluntarily files for bankruptcy, Cinnaholic can terminate the agreement immediately upon written notice, without any opportunity to cure.