Considering a Cinnabon Franchise? Don’t Overlook These 42 Important Franchise Fees

If you are considering a Cinnabon franchise, don’t get blindsided by these 42 important franchise fees (from the initial franchise fee, to the royalty fee, to 40 other fees found in Items 5 and 6 of Cinnabon’s 2016 FDD).

1.  Initial Franchise Fee:  $7,500 to $30,000

• When you sign a Franchise Agreement for a Full Bakery, you pay an initial franchise fee (the “Initial Franchise Fee”) of $30,000. When you sign a Franchise Agreement and Express Schedule for an Express Bakery, you pay an Initial Franchise Fee of $7,500.

• You will also pay $5,000 to $5,500 plus shipping, where applicable, for your Marketing Opening Kit.

• If you sign a Franchise Agreement and you do not have a location for your Bakery that is accepted by Cinnabon (“Accepted Location”), your Franchise Agreement will identify a trade area that Cinnabon negotiates with you in which you must locate an Accepted Location.

• Cinnabon will not refund any part of the Initial Franchise Fee paid under the Franchise Agreement.

• Cinnabon reserves the right to reduce the Initial Franchise Fee under certain circumstances, including:

• (i) as an economic incentive for a franchisee to open a certain location, with the determination made on a case-by-case review of all relevant economic factors;
• (ii) as an inducement for existing operators to open additional Shops;
• (iii) as an inducement for someone to reopen a closed Shop;
• (iv) as an inducement for someone to take over an operating Shop;
• (v) as an inducement for a professional multi-unit operator to open several Shops; or
• (vi) to allow a franchisee to have additional money to spend on store improvements and marketing during the first 12 months of operation.

• If you sign multiple Franchise Agreements at the same time with a Multi-Unit Addendum to develop a set number of Bakeries, the Initial Franchise Fee shall be $30,000 for each Bakery that you develop. You must pay Cinnabon all of the Initial Franchise Fees for all of the Bakeries that you commit to develop at the time you sign the Franchise Agreements with a Multi-Unit Addendum.

• If you fail to develop any of the Bakeries by the deadlines set forth therein, or any Franchise Agreement(s) subject to the Multi-Unit Addendum are terminated, you will not receive a refund of any Initial Franchise Fees that you have prepaid.

• In certain rare circumstances, Cinnabon may permit installment payments of the Initial Franchise Fee on terms negotiated with the franchisee.

2.  Royalty Fee:  for Full Bakeries, 6.0% of Net Sales; for Express Bakeries, the then-current price per case of freezer to oven (“FTO”) rolls or other approved proprietary Cinnabon products you purchase from Cinnabon or its designated supplier

• Due Date:  For Full Bakeries, payable by Cinnabon’s account period on Net Sales for the prior period; for Express Bakeries, on receipt of Cinnabon’s invoice or its designated supplier’s invoice for the FTO rolls.

3.  Advertising Contribution:  1.5% of Net Sales, but Cinnabon may adjust this amount up to 3% of Net Sales

• Due Date:  Same as Royalty Fee.

4.  Adverting Cooperative Contribution:  an amount set by your Advertising Cooperative

• Due Date:  Same as Royalty.

5.  Local Marketing Obligation:  each calendar quarter, you must spend not less than 1% of Net Sales on local market advertising

• Due Date:  Each calendar quarter.

6.  Promotions:  costs to purchase, lease, and install all materials necessary for promotional campaigns, including counter cards, posters, banners, signs, photographs, give-away items, and gift cards. Cinnabon may charge you its costs plus a reasonable administrative fee.

• Due Date:  As incurred.

7.  EFT NSF Fee:  Cinnabon’s out-of-pocket costs and an administrative fee

• Due Date:  On invoice.

• If Cinnabon drafts money from your account under its electronic funds transfer (“EFT”) or draft system, and there are insufficient funds (“NSF”) to cover the draft, it will charge you the return costs charged by its bank and an administrative fee to cover its costs of addressing the nonpayment.

• This fee is in addition to interest on the amount due.

8.  Interest:  1.5% per month or maximum legal interest rate

• Due Date:  On invoice.

• You must pay Cinnabon or its affiliates interest on any amounts past due to it or its affiliates.

9.  Late Fee for Reports, Financial Statements, or Tax Returns:  $50 per week

• Due Date:  On invoice.

• You must pay this late fee if you fail to submit timely, complete, and accurate reports, financial statements, and tax returns when due.

10.  Taxes:  Cinnabon’s cost

• Due Date:  On invoice.

• You must pay Cinnabon all taxes (except its income taxes) it pays for products or services it furnishes to you, or on its collection of the Initial Franchise Fee, Royalty, and Advertising Contribution from you.

11.  Subsequent Trainee Initial Training Fee:  currently, up to $500 per trainee

• Due Date:  Before attending training.

12.  On-Site Training and Assistance:  a reasonable fee, currently $50 per hour per trainer, plus a trainer’s travel and living expenses

• Due Date:  On invoice.

13.  Additional Support/Consulting Fee:  a reasonable fee, currently $500 per day, plus travel and living expenses

• Due Date:  On invoice.

14.  Conference/Program Fee:  a reasonable fee, which will vary by program

• Due Date:  As incurred.

• Cinnabon may charge you a reasonable fee for any conferences, conventions, programs, or training sessions that it conducts. Cinnabon expects these fees to range from $0 to $2,500.

15.  Training Cancellation Fee:  Cinnabon’s out-of-pocket costs

• Due Date:  On invoice.

16.  Electronic Learning Management System:  Cinnabon estimates the cost will be $500 to $750 annually

• Due Date:  As incurred; payable to Cinnabon or third-party vendor.

• Cinnabon may require you to implement an electronic learning management system for manager certification and employee training.

17.  Supplier/Product Evaluation Fee:  the greater of $2,500 or Cinnabon’s reasonable costs incurred in evaluating the Supplier, Product, and/or services

• Due Date:  On invoice.

18.  Rent:  will vary based on location and other factors; Cinnabon estimates rent will range from $4,500 to $20,000 per month

• Due Date:  First day of every month; payable to Cinnabon or an affiliate or third-party landlord.

• Cinnabon or an affiliate may own the premises or hold the prime lease for the premises, and rent or sublease the premises of your Bakery to you.

19.  Relocation Fee:  10% of the then-current Initial Franchise Fee

• Due Date:  Before Cinnabon signs relocation Franchise Agreement.

20.  Lease Renewal Fee:  Cinnabon’s then-current fee. As of the date of the 2016 disclosure document, the fee is $2,000.

• Due Date:  As incurred.

• Cinnabon reserves the right to charge you a fee if you renew your lease or if your lease is extended by a landlord for a period of 12 months.

21.  Lease Documentation Fee:  $500 for each failure

• Due Date:  As incurred.

• Cinnabon may charge you this fee if you fail to provide it with a signed copy of any modification, amendment, or renewal of a lease.

22.  Satellite Retail Unit (SRU) Fees:  two months advanced rent and a monthly rental fee of 8% of Net Sales up to the maximum monthly rent for the unit (currently $1,571.15 per five week month for a non-baking SRU, and $2,423.10 per five week month for a baking SRU)

• Due Date:  On invoice, except monthly rental fees are payable on or before the 1st day of the month on the Net Sales from the SRU operation for the prior month.

• If Cinnabon grants you the right to operate a SRU, you agree to participate in the SRU program for a minimum of 12 months and to utilize Cinnabon’s POS System. If you cancel the SRU within the first 12 months, you will be responsible for rental payments through the 12-month period.

• SRU monthly rental payments usually range from $150 to $2,500 per month.

23.  Transfer Fee:  50% of the then-current Initial Franchise Fee if it is a Control Transfer; if it is a transfer to a related party or that is a non-Control Transfer, 10% of the then-current Initial Franchise Fee

• Due Date:  At transfer closing.

24.  Renewal Fee:  10% of the then-current Initial Franchise Fee for the type of Bakery you will operate

• Due Date:  Before Cinnabon signs renewal Agreement.

25.  Computer Systems Fee:  a reasonable fee, which will vary based on the services Cinnabon provides

• Due Date:  As needed.

• Paid to contractors or Cinnabon, as applicable. Cinnabon may charge a reasonable systems fee for modifications and enhancements and other maintenance and support services.

26.  Gift Card and Loyalty Program Fees:  amount of fees

• Due Date:  As incurred; payable to Cinnabon or third-party vendor.

• You must purchase and offer gift cards and loyalty cards (and related equipment) from Cinnabon’s designated gift card and loyalty card vendors. Cinnabon or its affiliates may charge an administrative cost for gift card and loyalty cards/programs.

27.  Purchasing Program Fee:  reasonable membership fees assessed by the Purchasing Program

• Due Date:  As incurred.

• If Cinnabon designates or establishes any purchasing and/or distribution cooperatives/associations/programs (“Purchasing Programs”), you must become a member and pay any membership fees assessed.

• Cinnabon currently does not have any Purchasing Programs which require membership fees.

28.  Supply Chain Fee:  currently $0.20 per case purchased through certain Appointed Distributors

• Due Date:  As incurred.

29.  Development Deadline Extension Fee:  $2,500 per missed deadline

• Due Date:  On invoice.

30.  Non-Compliance Fee:  currently $25 to $500 for a single default, but may vary based on the severity of defaults, number of defaults, and repetition of defaults

• Due Date:  On invoice.

31.  Failure to Comply with Standards or Law Fee:  up to a $5,000 fee plus Cinnabon’s reasonable expenses connected with any inspection, examination, or analysis of products

• Due Date:  On invoice.

32.  Repeated Inspection Fee:  cost of inspection

• Due Date:  On invoice.

• If Cinnabon or its representative inspects you as a result of your repeated or continuing failure to comply with any provision of the Franchise Agreement, you must pay Cinnabon the cost of the inspection, including the travel and living expenses of its representatives.

33.  Audit:  cost of audit

• Due Date:  On invoice.

34.  Liquidated Damages (Full Bakery):  the average monthly amount of Royalty that you owed Cinnabon during the past 36 months times the lesser of remainder of the term of the Franchise Agreement or 36 months

• Due Date:  Within 30 days of termination of your Franchise Agreement.

• You must pay this fee only if the termination occurs after the opening date of your Bakery and you are not insolvent at the time of termination.

35.  Liquidated Damages (Express Bakery):  the average amount you paid per month to purchase Proprietary Goods during the past 36 months times the lesser of remainder of the term of the Franchise Agreement or 36 months. If less than 36 months have passed since opening and termination, the amount will be the average amount you paid per month to purchase Proprietary Goods during the time between opening and termination, times the lesser of remainder of the term of the Franchise Agreement or 36 months.

• Due Date:  Within 30 days of termination of your Franchise Agreement.

36.  Appraiser’s Fee:  50% of appraiser’s fee

• Due Date:  On invoice.

• You must pay this fee only if Cinnabon elects to purchase your assets on termination or expiration of the Franchise Agreement and it cannot agree with you on the purchase price.

37.  Indemnification of Cinnabon:  Cinnabon’s cost

• Due Date:  On invoice.

• You indemnify Cinnabon from certain losses and expenses under the Franchise Agreement.

38.  Attorneys’ Fees:  Cinnabon’s cost

• Due Date:  On invoice.

• If Cinnabon becomes a party to a proceeding on an agreement between it and you, and it wins, or if it becomes a party to litigation or insolvency proceedings for your franchise, then you must pay Cinnabon’s reasonable attorneys’ fees and court costs.

39.  Reinstatement Fee:  10% of the amount of the then-current Initial Franchise Fee, plus Royalty Fees that would have been payable in period between termination and reinstatement

• Due Date:  Before reinstatement.

• If Cinnabon terminates your Franchise Agreement due to a health and safety default, you cure the default and want to be reinstated, and Cinnabon agrees to reinstate your Franchise Agreement, you must pay Cinnabon a reinstatement fee.

40.  De-identification Fee:  Cinnabon’s actual costs, plus interest and an administrative fee equal to 15% of its actual costs

• Due Date:  On invoice.

• Payable if Cinnabon terminates the Franchise Agreement, you fail to de-identify the Bakery, and Cinnabon makes the required changes on your behalf.

41.  Polling and POS System Support Fee:  currently estimated not to exceed $200 per month

• Due Date:  On invoice.

• You must remit to Cinnabon, its affiliate, or a third party vendor for the software and hardware support for the terminals for your POS System. The service collects sales data from your cash register system overnight.

42.  Credit Card Fees:  equipment costs and set up fees estimated to be up to $700 per terminal. Transaction fees estimated to be from 2.5% to 5.0% of transaction amounts. Other fees may apply depending on the vendor used for credit card processing.

• Due Date:  As incurred; payable to Cinnabon or third-party vendor.

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