Under what circumstances can Cinnaholic terminate the franchise agreement without providing an opportunity to cure?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
f is delivered to Franchisor. Notwithstanding the foregoing, if the breach is curable but is of a nature which cannot reasonably be cured with such 90 day period and Franchisor has commenced and is continuing to make good faith efforts to cure such breach, Franchisor shall be given an additional 60 day period to cure the same, and this Agreement shall not terminate. In the event of termination by Franchisee, all post-termination obligations of Franchisee described herein shall not be waived but shall be strictly adhered to by Franchisee.
21.2. Termination by Franchisor without a Cure Period. Franchisor may immediately terminate this Agreement upon written notice to Franchisee, without opportunity to cure, if:
(i) Franchisee files a petition under any bankruptcy or reorganization law, becomes insolvent, or has a trustee or receiver appointed by a court of competent jurisdiction for all or any part of its property;
(ii) Following commencement of the operation of the Bakery, Franchisee ceases to operate the Bakery at the Franchised Site;
(iii) Franchisee seeks to effect a plan of liquidation, reorganization, composition or arrangement of its affairs, whether or not the same shall be subsequently approved by a court of competent jurisdiction; it being understood that in no event shall this Agreement or any right or interest hereunder be deemed an asset in any insolvency, receivership, bankruptcy, composition, liquidation, arrangement or reorganization proceeding;
(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;
- (v) Franchisee makes a general assignment for the benefit of its creditors;
(vi) Franchisee fails to pay when due any amount owed to Franchisor or its affiliates or subsidiaries, whether under this Agreement or not, and Franchisee does not correct such failure within 10 calendar days after written notice thereof is delivered to Franchisee;
(vii) Franchisee fails to pay when due any amount owed to any creditor, supplier or lessor of the Bakery or the Franchised Site or any taxing authority for federal, state or local taxes (other than amounts being bona fide disputed through appropriate proceedings) and Franchisee does not correct such failure within 10 calendar days after written notice is delivered thereof to Franchisee;
(viii) Franchisee fails to commence operation of the Bakery at the Franchised Site within 14 months after execution of this Agreement, except for any delay that is agreed to in writing by the Franchisor, in its sole discretion;
(ix) Franchisee or any of Franchisee's owners are convicted of or plead no contest to a felony, a crime involving moral turpitude or any other crime or offense that is likely to adversely affect the reputation of the CINNAHOLIC® System and the goodwill associated with the Marks;
(x) Franchisee operatesthe Bakery or any phase of the franchised business in a manner that presents a health or safety hazard to Franchisee's customers, employees or the public;
(xi) Franchisee makes a material misrepresentation to Franchisor before or after being granted the franchise;
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, Cinnaholic can terminate the franchise agreement immediately, without allowing an opportunity to cure, under several specific circumstances. These include financial and operational defaults, as well as legal proceedings impacting the franchisee's business.
Specifically, Cinnaholic may terminate the agreement if the franchisee files for bankruptcy or reorganization, becomes insolvent, or has a trustee or receiver appointed for their property. Termination can also occur if the franchisee seeks to liquidate, reorganize, or arrange their affairs, or if an involuntary bankruptcy proceeding is filed against them and not dismissed within 60 days. Making a general assignment for the benefit of creditors also triggers immediate termination.
Operational failures that lead to immediate termination include ceasing to operate the bakery after commencement, failing to pay amounts owed to Cinnaholic, its affiliates, or subsidiaries within 10 days of written notice, or failing to pay amounts owed to creditors, suppliers, lessors, or taxing authorities within 10 calendar days of written notice. Furthermore, Cinnaholic can terminate the agreement without a cure period if the franchisee fails to commence operation of the bakery within 14 months after the agreement's execution, unless a written extension is granted by Cinnaholic. Finally, if a franchisee receives at least three default notices from Cinnaholic within a 12-month period, even if the defaults are cured, or if the franchisee is dissolved, Cinnaholic can immediately terminate the agreement. If the franchisee defaults on any other agreement with Cinnaholic, its affiliates, or approved suppliers, and such default is not cured within the time period outlined in that agreement, Cinnaholic can also terminate the franchise agreement without allowing for a cure period.
These terms highlight the importance of maintaining financial stability and operational compliance for Cinnaholic franchisees. Failure to meet these obligations can result in the immediate loss of the franchise, emphasizing the need for careful financial management and adherence to the franchise agreement.