Under what conditions might the standard 5% Royalty Fee for a Cinnaholic franchise not apply?

According to Cinnaholic's 2025 Franchise Disclosure Document, the standard 5% Royalty Fee is not a fixed obligation and can be affected by specific circumstances. The standard royalty fee is 5% of Gross Sales, paid every Tuesday for the preceding week's sales. However, if a Cinnaholic franchisee fails to maintain the operational standards of their bakery, Cinnaholic has the right to declare the franchisee in default of the franchise agreement.

In the event of such a default, Cinnaholic can increase the royalty fee to 10% of Gross Sales. Furthermore, the franchisee may be charged an additional $250 each week until the deficiencies are rectified. This increase in the royalty fee and the additional weekly charge serve as penalties for not adhering to the brand's standards and are designed to incentivize the franchisee to quickly correct any operational shortcomings.

This condition highlights the importance of maintaining Cinnaholic's standards. For a prospective franchisee, it underscores the need to adhere to the operational guidelines and requirements outlined in the franchise agreement and operations manual to avoid incurring higher royalty fees and additional charges. It also demonstrates Cinnaholic's commitment to brand consistency and quality across all franchise locations.