Under what conditions can Cinnaholic refuse to permit a transfer of ownership of a franchise?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
- (G) A PROVISION WHICH PERMITS A FRANCHISOR TO REFUSE TO PERMIT A TRANSFER OF OWNERSHIP OF A FRANCHISE, EXCEPT FOR GOOD CAUSE.
THIS SUBDIVISION DOES NOT PREVENT A FRANCHISOR FROM EXERCISING A RIGHT OF FIRST
REFUSAL TO PURCHASE THE FRANCHISE.
GOOD CAUSE SHALL INCLUDE, BUT IS NOT LIMITED TO:
- (i) THE FAILURE OF THE PROPOSED FRANCHISEE TO MEET THE FRANCHISOR'S THEN CURRENT REASONABLE QUALIFICATIONS OR STANDARDS.
- (ii) THE FACT THAT THE PROPOSED TRANSFEREE IS A COMPETITOR OF THE FRANCHISOR OR SUBFRANCHISOR.
- (iii) THE UNWILLINGNESS OF THE PROPOSED TRANSFEREE TO AGREE IN WRITING TO COMPLY WITH ALL LAWFUL OBLIGATIONS.
- (iv) THE FAILURE OF THE FRANCHISEE OR PROPOSED TRANSFEREE TO PAY ANY SUMS OWING TO THE FRANCHISOR OR TO CURE ANY DEFAULT IN THE FRANCHISE AGREEMENT EXISTING AT THE TIME OF THE PROPOSED TRANSFER.
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, Cinnaholic can refuse a transfer of ownership for "good cause." The FDD specifies several conditions that constitute good cause. These include if the proposed franchisee does not meet Cinnaholic's current qualifications or standards, if the proposed transferee is a competitor of Cinnaholic, or if the proposed transferee is unwilling to agree in writing to comply with all lawful obligations.
Additionally, Cinnaholic may refuse a transfer if either the current franchisee or the proposed transferee has not paid all sums owed to Cinnaholic or has failed to correct any existing default in the franchise agreement at the time of the proposed transfer. However, the FDD also notes that this does not prevent Cinnaholic from exercising a right of first refusal to purchase the franchise.
It's important to note that these conditions are not exhaustive, as the FDD states that "good cause shall include, but is not limited to" the listed reasons. This means Cinnaholic could potentially deny a transfer for other reasons deemed to be good cause. Prospective franchisees should carefully review the franchise agreement and consult with an attorney to fully understand the conditions under which a transfer may be denied and what recourse they may have.