Under what conditions can Cinnaholic increase the Royalty Fee to 10% of Gross Sales?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
the term hereof, Franchisee agrees to pay to Franchisor for the rights granted hereunder a royalty fee equal to 5% of the Gross Sales (as such term is hereinafter defined) of the Bakery (the "Royalty Fee"). Payment of the Royalty Fee shall be made on or before Tuesday of each week for Gross Sales of the Bakery for the preceding week. Franchisee acknowledges and agrees that in the event Franchisee is in default of this Agreement for failure to comply with any of the operational standards or specifications
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, the standard royalty fee is 5% of Gross Sales. However, Cinnaholic has the right to increase this royalty fee to 10% of Gross Sales under specific circumstances.
The increase to 10% can occur if a Cinnaholic franchisee defaults on the Franchise Agreement. This default specifically relates to failing to comply with the operational standards and specifications detailed in the Operations Manual, or not adhering to the obligations outlined in Section 9 of the Franchise Agreement.
In addition to the royalty fee increase, Cinnaholic may also impose a surcharge of $250 per week, or a pro-rata portion of the week, until the franchisee corrects the default. This provision serves as a financial disincentive for non-compliance and incentivizes franchisees to maintain operational standards and meet their contractual obligations. Prospective franchisees should carefully review the Operations Manual and Section 9 of the Franchise Agreement to fully understand the standards and obligations required to avoid these penalties.