Risk Score
Pending analysis
Investment Range
$241,082 - $526,582
Franchise Fee
$36,000
Total US Locations
81
Business Summary
Cinnaholic operates specialty bakeries that offer custom gourmet cinnamon rolls and other authorized food products and beverages. These bakeries typically occupy 700-1200 square feet and operate as casual, full-service establishments. Cinnaholic Bakeries also provide catering services to homes and businesses within a 10-mile radius.
Corporate History
Cinnaholic Franchising, LLC was organized as a Georgia Limited Liability Company on January 20, 2014. The company began offering franchises for its Cinnaholic Bakeries, specializing in custom gourmet cinnamon rolls and other food products, in February 2014. Cinnaholic Franchising, LLC has not operated any other type of business. An affiliate, Cinnaholic Dunwoody LLC, has operated a Cinnaholic Bakery since December 2021, and another affiliate, Cinnaholic Franchising Canada Inc., was acquired in May 2023 to serve as the master franchisor in Canada.
Financial Overview
Investment Range
$241,082 - $526,582
Franchise Fee (Low)
$36,000
Franchise Fee (High)
$40,000
Royalty %
5%
Marketing %
2%
Equipment Costs (Low)
$75,000
Equipment Costs (High)
$150,000
Working Capital
$22,500
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Unqualified opinion
Financial Health Notes
The financial statements for Cinnaholic Franchising, LLC indicate a weak financial condition, with negative members' equity (deficit) for the years ending December 31, 2023, and 2022. This situation, highlighted as a "Special Risk" in the FDD, raises questions about Cinnaholic Franchising, LLC's financial ability to provide ongoing services and support to its franchisees. The unaudited balance sheet as of March 31, 2024, also reflects a significant negative equity.
Financing Details
Cinnaholic Franchising, LLC does not offer any direct or indirect financing to its franchisees. This includes not guaranteeing any notes, leases, or other obligations.
Performance Metrics
Total US Locations
81
Franchised Units
80
Corporate Units
1
Avg Square Footage
950
Franchising Since
2014
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
Yes
Litigation Count
5
Litigation Summary
Cinnaholic Franchising, LLC has been involved in several legal disputes. The company is currently suing Revel Systems in Georgia (Case No. 2023CV384522), alleging that Revel fraudulently induced them into a Master Services Agreement and then breached it by providing a point-of-sale system with frequent outages. Revel has counterclaimed for breach of contract. Additionally, Cinnaholic Franchising, LLC terminated a Franchise Agreement with Calipto Foods, Inc. and its guarantor, Philip Edwards. Cinnaholic Franchising, LLC initially filed a suit in California to compel arbitration in March 2022 (Case No. 30-2022-01250359-CU-PT-CJC), which was dismissed in May 2023. The arbitration concluded in January 2024 (AAA Arbitration Case No. 01-23-0000-2264), resulting in an award of $42,234.22 in favor of Cinnaholic Franchising, LLC, with the franchisee's counterclaims denied. In the past, Cinnaholic Franchising, LLC's CEO, Daryl Dollinger, was involved in two affiliate litigations from 2012 (In Re: The S&Q Shack, LLC, Adversary Proceeding No. 12-05429 and In Re: Raving Brands, Inc., Adversary Proceeding No. 12- 05417). These cases, which concerned alleged fraudulent transfers and corporate waste, were settled globally in November 2016 and dismissed in 2017 with payments totaling $400,000 made to the bankrupt estate.
Bankruptcy History
Cinnaholic Franchising, LLC's officer, Daryl Dollinger, was involved in two involuntary Chapter 7 bankruptcy proceedings for affiliated companies, S&Q Shack, LLC and Raving Brands, Inc. (RBI), filed in 2009. These bankruptcies stemmed from claims by a creditor, BV Retail, LLC, related to lease obligations and guarantees. S&Q Shack and RBI were placed into involuntary bankruptcy in August 2010. The claims were adjudicated, and the bankruptcies were terminated in 2017 following a global resolution and settlement in November 2016.
Agreement Terms
Initial Term
10 years
Renewal Term
10 years
Renewal Conditions
To renew, Cinnaholic franchisees must: provide written notice six months before the initial term expires; not be in default of the franchise agreement or any other related agreements; sign the franchisor's then-current franchise agreement (which may contain different terms, including higher fees); pay a renewal fee equal to half of the current initial franchise fee; complete all required maintenance, refurnishing, renovation, modernizing, and remodeling of the bakery to align with current brand standards; be current on all financial obligations to the franchisor, its affiliates, suppliers, and lessors; successfully complete any required retraining program; sign a general release of any claims against the franchisor; and provide evidence of their right to remain in possession of the franchised site or secure a suitable alternative location for the renewal term.
Training & Support Program
Franchisor Assistance
Before opening, Cinnaholic Franchising, LLC assists franchisees with site selection and approval, provides prototype architectural plans, licenses the trademarks, loans the Operations Manual, offers grand opening assistance including social media marketing, and provides guidance on development, equipment, and employee selection/training. They also provide initial training for up to two managers and a project manager for pre-construction activities. During operation, Cinnaholic Franchising, LLC provides periodic guidance to franchisees as deemed necessary on methods, procedures, advertising, recipes, accounting, purchasing, inventory control, inspections, and system improvements. The franchisor also notifies franchisees of changes to standards, approved suppliers, and new developments, grants access to advertising and promotional materials, and provides additional training for managers.
Initial Training Hours
56
Training Location
Atlanta, GA or a designated training facility
Ongoing Support
Cinnaholic Franchising, LLC provides ongoing guidance to its franchisees as needed on methods, procedures, advertising, recipes, accounting, purchasing, inventory control, and system improvements. The franchisor also provides updates on bakery standards and specifications, and approved suppliers. Franchisees have access to advertising and promotional materials developed by Cinnaholic Franchising, LLC, and additional training is available for managers. Periodic conferences and management meetings may also be held to discuss various aspects of the business.
Franchise Requirements
Industry Experience Required
No
Management Experience Required
No
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
retail
Owner Participation
supervisory
Territory Type
protected
Staff Count
10
Territory Size Requirements
Cinnaholic Franchising, LLC's franchise territories are determined on a case-by-case basis by considering factors like population, traffic flow, businesses present, competitors, and demographics around the bakery location. There is no set minimum territory size, with territories ranging from just the approved bakery site up to a 1.5-mile radius around the bakery. For non-traditional locations such as airports or malls, the territory is limited to the site of the bakery itself.
Staffing Notes
Cinnaholic Franchising, LLC expects a Cinnaholic Bakery to employ approximately 5 to 15 persons, some of whom may be part-time. Franchisees are solely responsible for all employment-related decisions, including training and managing their staff. A manager who has successfully completed the initial training program must be present at the bakery during all operating hours and dedicate their full time and attention to its on-premises management. This manager is required to directly supervise and manage the bakery's daily operations. The bakery must be open for a minimum of 70 hours per week.