Under the Cinnaholic franchise agreement, is a franchisee permitted to withhold payments owed to the franchisor due to the franchisor's alleged failure to fulfill its obligations?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
Neither Franchisor nor Franchisee will be liable for loss or damage or deemed to be in breach of this Agreement if Franchisor's or Franchisee's failure to perform any obligation results from: (i) transportation shortages, inadequate supply of equipment, products, supplies, labor, material or energy or the voluntary foregoing of the right to acquire or use any of the foregoing in order to accommodate or comply with the orders, requests, regulations, recommendations or instructions of any federal, state or municipal government or any department or agency thereof; (ii) acts of God; (iii) fires, strikes, embargoes, wars or riots; or (iv) any other similar event or cause beyond the control of the affected party. Any delay resulting from any of said causes will extend performance accordingly or excuse performance, in whole or in part, as may be reasonable, except that said causes will not excuse payments of amounts owed by Franchisee to Franchisor hereunder.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to the 2025 Cinnaholic Franchise Disclosure Document, a franchisee's obligation to make payments to Cinnaholic is generally not excused, even in situations where Cinnaholic might be experiencing failures in its own performance. Specifically, under Section 35, regarding "Events Beyond Control," neither Cinnaholic nor the franchisee will be held liable or in breach of the agreement for failures in performance that arise from certain causes. These causes include transportation shortages, inadequate supply of equipment, acts of God, fires, strikes, embargoes, wars, or riots, or any other similar event beyond the control of the affected party.
However, the Cinnaholic franchise agreement explicitly states that these causes will not excuse the franchisee from making payments owed to Cinnaholic. This means that even if circumstances arise that hinder Cinnaholic's ability to fulfill its obligations, the franchisee is still required to make all payments as agreed upon in the franchise agreement.
This clause places a significant financial responsibility on the franchisee, as they must continue to meet their payment obligations regardless of external factors impacting Cinnaholic's performance. Prospective franchisees should carefully consider this provision and its potential implications for their business operations and financial stability. It is advisable to seek legal counsel to fully understand the scope of this obligation and to assess the risks involved.