Under what circumstances is Cinnaholic required to compensate a franchisee for inventory, supplies, equipment, fixtures, and furnishings upon non-renewal?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
- (D) A PROVISION THAT PERMITS A FRANCHISOR TO REFUSE TO RENEW A FRANCHISE WITHOUT FAIRLY COMPENSATING THE FRANCHISEE BY REPURCHASE OR OTHER MEANS FOR THE FAIR MARKET VALUE, AT THE TIME OF EXPIRATION, OF THE FRANCHISEE'S INVENTORY, SUPPLIES, EQUIPMENT, FIXTURES, AND FURNISHINGS.
PERSONALIZED MATERIALS WHICH HAVE NO VALUE TO THE FRANCHISOR AND INVENTORY, SUPPLIES, EQUIPMENT, FIXTURES, AND FURNISHINGS NOT REASONABLY REQUIRED IN THE CONDUCT OF THE FRANCHISED BUSINESS ARE NOT SUBJECT TO COMPENSATION.
THIS SUBSECTION APPLIES ONLY IF: (i) THE TERM OF THE FRANCHISE IS LESS THAN 5 YEARS; AND (ii) THE FRANCHISEE IS PROHIBITED BY THE FRANCHISE OR OTHER AGREEMENT FROM CONTINUING TO CONDUCT SUBSTANTIALLY THE SAME BUSINESS UNDER ANOTHER TRADEMARK, SERVICE MARK, TRADE NAME, LOGOTYPE, ADVERTISING, OR OTHER COMMERCIAL SYMBOL IN THE SAME AREA SUBSEQUENT TO THE EXPIRATION OF THE FRANCHISE OR THE FRANCHISEE DOES NOT RECEIVE AT LEAST 6 MONTHS ADVANCE NOTICE OF FRANCHISOR'S INTENT NOT TO RENEW THE FRANCHISE.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 27–35)
What This Means (2025 FDD)
According to the 2025 Cinnaholic Franchise Disclosure Document, the State of Michigan prohibits franchise agreements from including a provision that allows Cinnaholic to refuse renewal of a franchise without fairly compensating the franchisee. This compensation would be for the fair market value of the franchisee's inventory, supplies, equipment, fixtures, and furnishings at the time of expiration.
However, Cinnaholic is not required to compensate the franchisee for personalized materials that have no value to Cinnaholic. Additionally, Cinnaholic is not required to compensate for inventory, supplies, equipment, fixtures, and furnishings not reasonably required for conducting the franchised business.
This compensation requirement applies only if two conditions are met: (1) the franchise term is less than 5 years, and (2) the franchisee is either prohibited from operating a similar business in the same area under a different brand after the franchise expires, OR the franchisee does not receive at least 6 months' advance notice of Cinnaholic's intent not to renew the franchise.