Is a transfer fee required when transferring the Cinnaholic agreement to a deceased or disabled Developer's spouse or immediate family?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
interest of any deceased or disabled shareholder, partner, member or other equity holder of the Franchisee or an Equity Holder must be Transferred to a party approved by Franchisor. Any Transfer, including, without limitation, transfers by devise or inheritance or trust provisions, shall be subject to the same conditions for Transfers set forth in Section 19.4. Franchisor shall not unreasonably withhold its consent to the Transfer of this Agreement or any ownership interest to the deceased or disabled Franchisee's or Equity Holder's spouse, heirs or members of his or her immediate family, provided all requirements of Section 19.4 have been complied with (except payment of the transfer fee, which shall not apply to such Transfers). A "Disability" shall have occurred with respect to Franchisee if Franchisee, or, if Franchisee is a corporation, partnership or limited liability company, its controlling shareholder, partner, member or other equity holder, is unable to actively participate in its activities as Franchisee hereunder for any reason for a continuous period of six months. As used in this Section 19.3, "Franchisee" may include a disabled or deceased controlling shareholder, partner or member where the context so requires.
- 19.4. Approval of Assignment. Franchisor's approval of any Transfer is, in all cases, contingent upon the following: the purchaser and/or the controlling persons of the purchaser having a satisfactory credit rating, being of good moral character, having business qualifications satisfactory to Franchisor, being willing to comply with Franchisor's training requirements and being willing to enter into an agreement in writing to assume and perform all of Franchisee's duties and obligations hereunder and/or enter into a new Franchise Agreement, if so requested by Franchisor, and agreeing to enter into any and all agreements with Franchisor that are being required of all new franchisees, including a guaranty agreement, or any other agreement which may require payment of different or increased fees from those paid under this Agreement; provided, however, the amount of the Royalty Fees paid hereunder shall not be increased upon an assignment;
- (ii) the terms and conditions of the proposed transfer (including, without limitation, the purchase price) being satisfactory to Franchisor;
- (iii) all monetary obligations (whether hereunder or not) of Franchisee to Franchisor or Franchisor's affiliates or subsidiaries being paid in full;
Source: Item 23 — RECEIPT (FDD pages 62–269)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, a transfer fee is generally required for transferring the agreement. However, the FDD states that the transfer fee is waived when transferring the Cinnaholic agreement or ownership interest to the deceased or disabled Developer's spouse, heirs, or immediate family members.
For a Cinnaholic franchisee, this means that in the unfortunate event of death or disability, the franchise can be transferred to a spouse, heir, or immediate family member without incurring the standard $5,000 transfer fee. This provides a measure of security and continuity for the franchisee's family.
However, all other conditions for transfer outlined in Section 13.4 of the agreement must still be met. These conditions include the purchaser's satisfactory credit rating and business qualifications, agreement to assume all of the Developer's duties, payment of outstanding obligations to Cinnaholic, and execution of a general release of claims against the franchisor. Therefore, while the transfer fee is waived, the transferee must still meet Cinnaholic's standards for franchisees.
This exception to the transfer fee requirement can be a significant benefit for Cinnaholic franchisees, as it reduces the financial burden associated with transferring the franchise in cases of death or disability, while still ensuring that Cinnaholic maintains control over who operates the franchise.