Can Cinnaholic unreasonably withhold consent to the transfer of the agreement upon the death or disability of the developer?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
Upon Developer's death or Disability (as such term is hereinafter defined), this Agreement or the ownership interest of any deceased or disabled shareholder, partner, member or other equity holder of the Developer or an Equity Holder must be Transferred to a party approved by Franchisor.
Any Transfer, including, without limitation, transfers by devise or inheritance or trust provisions, shall be subject to the same conditions for Transfers set forth in Section 13.4 below.
Franchisor shall not unreasonably withhold its consent to the Transfer of this Agreement or any ownership interest to the deceased or disabled Developer's or Equity Holder's spouse, heirs or members of his or her immediate family, provided all requirements of Section 13.4 have been complied with (except payment of the transfer fee, which shall not apply to such Transfers).
A "Disability" shall have occurred with respect to Developer if Developer, or, if Developer is a corporation, partnership or limited liability company, its controlling shareholder, partner, member or other equity holder, is unable to actively participate in its activities as Developer hereunder for any reason for a continuous period of six months.
Source: Item 23 — RECEIPT (FDD pages 62–269)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, in the event of the developer's death or disability, the franchise agreement or ownership interest must be transferred to a party approved by Cinnaholic. Transfers, including those by devise, inheritance, or trust provisions, are subject to the same conditions as other transfers. However, Cinnaholic agrees to not unreasonably withhold consent to the transfer of the agreement or ownership interest to the deceased or disabled developer's spouse, heirs, or immediate family members, provided all other requirements are met. The only exception to these requirements is the transfer fee, which is waived in such cases.
This means that if a Cinnaholic developer dies or becomes disabled, their spouse, heirs, or immediate family can potentially take over the franchise without Cinnaholic unreasonably denying the transfer. This provides a safety net for the franchisee's family, ensuring the business can continue under their ownership, assuming they meet the standard requirements.
However, it's important to note that all other conditions for transfers, as outlined in Section 13.4 of the agreement, must still be met. These conditions include the transferee having a satisfactory credit rating, good moral character, and business qualifications, as well as agreeing to assume all of the developer's duties and obligations. Additionally, all monetary obligations to Cinnaholic must be paid, and a general release of claims against Cinnaholic must be executed.
While the transfer fee is waived for transfers to the developer's spouse, heirs, or immediate family, the standard transfer fee for other transferees is $5,000, plus reimbursement for all legal, training, and other expenses incurred by Cinnaholic in connection with the transfer. This clause provides some reassurance to potential franchisees that Cinnaholic will work with their families in the event of death or disability, but it is still important to understand all the conditions and requirements for transfer.