Ella_Cafe 2024 Franchise FAQ - FDD Ninja

Question 1

What are some examples of non-curable defaults that could lead to termination of the Ella Cafe franchise agreement?

Accepted Answer

| Provision | Section in franchise or | Summary |
|---|---|---|
|  | other agreement |  |
|  |  | If you sign a MUDA, you may terminate |
|  |  | it at any time. |
| e. Termination by |  | None None |
| franchisor without cause |  |  |
| f. Termination by |  | We may terminate your agreement for |
| franchisor with cause |  |  |
|  |  | cause, subject to any applicable notice |
|  |  | and cure opportunity. |
|  |  | If you sign a MUDA, termination of |
|  |  | your MUDA does not give us the right |
|  |  | to terminate your franchise agreement. |
|  |  | However, if your franchise agreement is |
|  |  | terminated, we have the right to |
|  |  | terminate your MUDA. |
| g. “Cause” defined-- curable defaults | FA: Section 14.3, 14.4 | Non-payment by you (10 days to cure); violate franchise agreement other than non-curable default (30 days to cure). Non-payment by you (10 days to cure); |
|  | MUDA: Article 9 | violate franchise agreement other than |
|  |  | non-curable default (30 days to cure). |
|  |  |  |
| h. “Cause” defined-- | FA: Section 14.1, 14.2 | FA: Misrepresentation when applying to |
| non-curable defaults |  |  |
|  | MUDA: Article 4, 9 | be a franchisee; knowingly submitting |
|  |  | false information; bankruptcy; lose |
|  |  | possession of your location; violation of |
|  |  | law; violation of confidentiality; |
|  |  | violation of non-compete; violation of |
|  |  | transfer restrictions; slander or libel of |
|  |  | us; refusal to cooperate with our |
|  |  | business inspection; cease operations for |
|  |  | more than 5 consecutive days; three |
|  |  | defaults in 12 months; cross-termination; |
|  |  | charge or |
|  |  | accusation of an act that is reasonably |
|  |  | likely to materially and unfavorably |
|  |  | affect our brand; any other breach of |
|  |  | franchise agreement which by its nature |
|  |  | cannot be cured. |
|  |  | MUDA: failure to meet development |
|  |  | schedule; violation of franchise |
|  |  | agreement or other agreement which |
|  |  | gives us the right to terminate it.

Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 41–45)

Question 2

What are the requirements for an Ella Cafe franchisee to renew their franchise agreement?

Accepted Answer

d these provisions in the agreements attached to this disclosure document.

| Provision | Section in franchise or | Summary |
|---|---|---|
|  | other agreement |  |
| a. Length of the | Franchise Agreement (FA): | 10 years from date of franchise |
| franchise term |  | agreement. |
|  | Section 3.1 |  |
|  | Multi-Unit Development |  |
|  | Agreement (MUDA): |  |
|  | Section 2.1 |  |
|  |  |  |
| b. Renewal or extension of the term | FA: Section 3.2 | You may obtain a successor franchise agreement for up to two additional 5- year terms. |
|  | MUDA: none |  |
|  |  |  |
| c. Requirements for | FA: Section 3.2, 3.3 | In order to renew you must: (a) have fully |
| franchisee to renew or |  |  |
| extend |  |  |
|  | MUDA: none | complied with the Franchise Agreement; (b) |
|  |  | have updated your Coffee House equipment; |
|  |  | (c) have satisfied all monetary obligations |
|  |  | owed to us or our affiliates including |
|  |  | payment of renewal fee in the amount of |
|  |  | 50% of than current initial franchise fee; (d) |
|  |  | not be in default of any provision of the |
|  |  | Franchise Agreement or any other |
|  |  | agreement between you and us; (e) have |
|  |  | timely notified us of your intent to renew; |
|  |  | (f) sign a current Franchise Agreement, |
|  |  | which may have materially different terms |
|  |  | and conditions (including higher royalty |
|  |  | fees and higher marketing Fees);

Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 41–45)

Question 3

What was the total number of Ella Cafe outlets opened in Florida during the year 2023?

Accepted Answer

| State | Year | Outlets at | Outlets Opened | Outlets | Outlets Closed | Outlets Sold to Franchisee | Outlets at End of the Year |
|---|---|---|---|---|---|---|---|
|  |  | the Start |  | Reacquired |  |  |  |
|  |  | of the |  | From |  |  |  |
|  |  | Year |  | Franchisee |  |  |  |
| Florida | 2021 | 1 | 0 | 0 | 0 | 0 | 1 |
|  | 2022 | 1 | 0 | 0 | 0 | 0 | 1 |
|  | 2023 | 1 | 1 | 0 | 0 | 0 | 2 |
| Totals | 2021 | 1 | 0 | 0 | 0 | 0 | 1 |
|  | 2022 | 1 | 0 | 0 | 0 | 0 | 1 |
|  | 2023 | 1 | 1 | 0 | 0 | 0 | 2 |

Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 47–49)

Question 4

What are all the fees a franchisee might pay to Ella Cafe, combining the initial fees (Item 5) and other fees (Item 6)?

Accepted Answer

Franchise Fee

When you sign your franchise agreement, you must pay us \$49,500 as the initial franchise fee ("Initial Franchise Fee"). The initial franchise fee is uniformly calculated for all franchisees and is non-refundable upon payment.

#### Multi-Unit Development Fee

If we award you multi-unit development rights to develop more than one Coffee House, you must sign our Multi-Unit Development Agreement ("MUDA") in the form attached as Exhibit C to this disclosure document. The minimum number of units required to develop Coffee Houses under the MUDA is three (3) units. Currently, we offer a reduction of your Initial Franchise Fee to \$30,000 for your second franchise developed after the first franchised unit; your third franchise developed will be \$25,000. Each initial franchise fee for each additional franchise developed after the third franchised unit is \$20,000. For example, if you elect to development three Coffee Houses, the Development Fee will be \$104,000 calculated as \$49,500 + \$30,000 for the second unit + \$25,000 for the third unit. We reserve the right to cancel or modify any incentive program or discount at any time, provided you execute the MUDA simultaneously with the execution of your first franchise agreement.

When you sign the MUDA, you will sign the Franchise Agreement for the first Coffee House, and we will credit the applicable portion of the Development Fee to satisfy payment in full for the related initial franchise fee. When you sign each additional Franchise Agreement under the MUDA, we will credit the applicable portion of your Development Fee to satisfy payment in full for the related initial franchise fee. The Development Fee is calculated uniformly for all franchisees and is nonrefundable upon payment.

#### Initial Inventory

Before opening your Ella Coffee House, you must purchase your Initial Inventory Package from us. The Initial Inventory Package includes, among other things, the initial proprietary coffee, supplies, branded paper products, and merchandise necessary to open your Coffee House. The current cost of the Initial Inventory Package ranges from \$24,600 to \$53,000. This cost is nonrefundable and payable when you submit your purchase order.

Except as described in this Item 5, all fees are uniformly imposed on new franchisees receiving this offering. All fees are fully earned when paid to us and are non-refundable upon payment.

![](_page_9_Picture_0.jpeg)

#### **ITEM 6 OTHER FEES**

| Type of Fee1 | Amount | Due Date | Remarks |
|---|---|---|---|
| Software | Currently, $100 - | Monthly |  |
| Subscription | $200 per month |  |  |
| Non-Compliance | $500 | On demand |  |
| Fee |  |  |  |
| Customer Rewards, and Gift Cards | Currently not implemented by us but may be implemented in future | As invoiced | Fees for access management of customer rewards, and/or gift card system and redemption. |
| Reimbursement | Amount that we spend on your behalf, plus 10% |  |  |
| Late Fee | $100 plus interest on the unpaid amount at a rate equal to 18% per year (or, if such payment exceeds the maximum allowed by law, then interest at the highest rate allowed by law) | On demand | We may charge a late fee if you fail to make a required payment when due. |
| Insufficient Funds Fee | $30 (or, if such amount exceeds the maximum allowed by law, then the maximum allowed by law) | On demand | We may charge an insufficient funds fee if a payment made by you is returned because of insufficient funds in your account. |
| Costs Of Collection | Our actual costs Our actual costs | As incurred |  |
| Special Support Fee | Our then-current fee, plus our expenses. Currently, $600 per day.

Question 5

Besides fee obligations under the Franchise Agreement, will the operational characteristics of an Ella Cafe franchise business be similar to the affiliate-owned outlet?

Accepted Answer

- (5) Other than your fee obligations under the signed Franchise Agreement, as disclosed in this financial representation, operational characteristics of your Franchise Business will be similar to that of operational characteristics of our affiliate owned outlet.

Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 45–47)

Question 6

How does the Ella Cafe's initial franchise fee (Item 5) compare to the ongoing software subscription fees (Item 6)?

Accepted Answer

Franchise Fee

When you sign your franchise agreement, you must pay us \$49,500 as the initial franchise fee ("Initial Franchise Fee"). The initial franchise fee is uniformly calculated for all franchisees and is non-refundable upon payment.

#### Multi-Unit Development Fee

If we award you multi-unit development rights to develop more than one Coffee House, you must sign our Multi-Unit Development Agreement ("MUDA") in the form attached as Exhibit C to this disclosure document. The minimum number of units required to develop Coffee Houses under the MUDA is three (3) units. Currently, we offer a reduction of your Initial Franchise Fee to \$30,000 for your second franchise developed after the first franchised unit; your third franchise developed will be \$25,000. Each initial franchise fee for each additional franchise developed after the third franchised unit is \$20,000. For example, if you elect to development three Coffee Houses, the Development Fee will be \$104,000 calculated as \$49,500 + \$30,000 for the second unit + \$25,000 for the third unit. We reserve the right to cancel or modify any incentive program or discount at any time, provided you execute the MUDA simultaneously with the execution of your first franchise agreement.

Question 7

How does the Ella Cafe's initial franchise fee (Item 5) compare to the potential for generating revenue through catering or delivery services, considering the lack of an exclusive territory (Item 12)?

Accepted Answer

When you sign your franchise agreement, you must pay us $49,500 as the initial franchise fee ("Initial Franchise Fee"). The initial franchise fee is uniformly calculated for all franchisees and is non-refundable upon payment.

You will not receive an exclusive territory. You may face competition from other franchisees, from Coffee Houses that we own, or from other channels of distribution or competitive brands that we control.

You are not restricted from soliciting or accepting orders from consumers outside of your Designated Area with our prior written consent, except with respect to Reserved Areas and the channels of distribution described below, or if we limit the area in which you can provide catering services.

Question 8

How does the Ella Cafe's initial franchise fee (Item 5) compare to the potential for generating revenue through online ordering and delivery services, considering the lack of an exclusive territory (Item 12)?

Accepted Answer

When you sign your franchise agreement, you must pay us $49,500 as the initial franchise fee ("Initial Franchise Fee"). The initial franchise fee is uniformly calculated for all franchisees and is non-refundable upon payment.

You will not receive an exclusive territory. You may face competition from other franchisees, from Coffee Houses that we own, or from other channels of distribution or competitive brands that we control.

There are no restrictions on us from soliciting or accepting orders from consumers inside your territory. We reserve the right to use other channels of distribution, such as the Internet, catalog sales, telemarketing, or other direct marketing sales, to make sales within your territory using our principal trademarks or using trademarks different from the ones you will use under your franchise agreement. We do not pay any compensation to you for soliciting or accepting orders from inside your territory.

Question 9

How does the Ella Cafe's initial franchise fee (Item 5) compare to the potential return on investment (ROI) a franchisee might expect, considering the ongoing monthly fees (Item 6) and the lack of an exclusive territory (Item 12)?

Accepted Answer

[Item 5: INITIAL FEES]

#### **ITEM 5 INITIAL FEES**

#### Franchise Fee

When you sign your franchise agreement, you must pay us $49,500 as the initial franchise fee ("Initial Franchise Fee"). The initial franchise fee is uniformly calculated for all franchisees and is non-refundable upon payment.

#### Initial Inventory

Before opening your Ella Coffee House, you must purchase your Initial Inventory Package from us. The Initial Inventory Package includes, among other things, the initial proprietary coffee, supplies, branded paper products, and merchandise necessary to open your Coffee House. The current cost of the Initial Inventory Package ranges from $24,600 to $53,000. This cost is nonrefundable and payable when you submit your purchase order.

[Item 12: TERRITORY]

#### **ITEM 12 TERRITORY**

You will not receive an exclusive territory. You may face competition from other franchisees, from Coffee Houses that we own, or from other channels of distribution or competitive brands that we control.

Question 10

How does the Ella Cafe's initial franchise fee (Item 5) compare to the potential revenue a franchisee might generate in the first year, considering the lack of an exclusive territory (Item 12)?

Accepted Answer

When you sign your franchise agreement, you must pay us $49,500 as the initial franchise fee ("Initial Franchise Fee"). The initial franchise fee is uniformly calculated for all franchisees and is non-refundable upon payment.

You will not receive an exclusive territory. You may face competition from other franchisees, from Coffee Houses that we own, or from other channels of distribution or competitive brands that we control.

Before opening your Ella Coffee House, you must purchase your Initial Inventory Package from us. The Initial Inventory Package includes, among other things, the initial proprietary coffee, supplies, branded paper products, and merchandise necessary to open your Coffee House. The current cost of the Initial Inventory Package ranges from $24,600 to $53,000. This cost is nonrefundable and payable when you submit your purchase order.

Question 11

How does the Ella Cafe's initial franchise fee (Item 5) compare to the total estimated initial investment (Item 7) as a percentage?

Accepted Answer

Franchise Fee

When you sign your franchise agreement, you must pay us \$49,500 as the initial franchise fee ("Initial Franchise Fee"). The initial franchise fee is uniformly calculated for all franchisees and is non-refundable

Question 12

How does the Ella Cafe's initial franchise fee (Item 5) relate to the potential for long-term profitability and growth, considering the ongoing monthly fees (Item 6) and the competitive landscape (Item 12)?

Accepted Answer

Franchise Fee

When you sign your franchise agreement, you must pay us \$49,500 as the initial franchise fee ("Initial Franchise Fee"). The initial franchise fee is uniformly calculated for all franchisees and is non-refundable upon payment.

#### Multi-Unit Development Fee

If we award you multi-unit development rights to develop more than one Coffee House, you must sign our Multi-Unit Development Agreement ("MUDA") in the form attached as Exhibit C to this disclosure document. The minimum number of units required to develop Coffee Houses under the MUDA is three (3) units. Currently, we offer a reduction of your Initial Franchise Fee to \$30,000 for your second franchise developed after the first franchised unit; your third franchise developed will be \$25,000. Each initial franchise fee for each additional franchise developed after the third franchised unit is \$20,000. For example, if you elect to development three Coffee Houses, the Development Fee will be \$104,000 calculated as \$49,500 + \$30,000 for the second unit + \$25,000 for the third unit. We reserve the right to cancel or modify any incentive program or discount at any time, provided you execute the MUDA simultaneously with the execution of your first franchise agreement.

When you sign the MUDA, you will sign the Franchise Agreement for the first Coffee House, and we will credit the applicable portion of the Development Fee to satisfy payment in full for the related initial franchise fee. When you sign each additional Franchise Agreement under the MUDA, we will credit the applicable portion of your Development Fee to satisfy payment in full for the related initial franchise fee. The Development Fee is calculated uniformly for all franchisees and is nonrefundable upon payment.

#### Initial Inventory

Before opening your Ella Coffee House, you must purchase your Initial Inventory Package from us. The Initial Inventory Package includes, among other things, the initial proprietary coffee, supplies, branded paper products, and merchandise necessary to open your Coffee House. The current cost of the Initial Inventory Package ranges from \$24,600 to \$53,000. This cost is nonrefundable and payable when you submit your purchase order.

Except as described in this Item 5, all fees are uniformly imposed on new franchisees receiving this offering. All fees are fully earned when paid to us and are non-refundable upon payment.

Question 13

What is the initial franchise fee for Ella Cafe (Item 5) and how does it relate to the total estimated initial investment range (Item 7)?

Accepted Answer

[Item 5: INITIAL FEES]

#### **ITEM 5 INITIAL FEES**

#### Franchise Fee

When you sign your franchise agreement, you must pay us $49,500 as the initial franchise fee ("Initial Franchise Fee"). The initial franchise fee is uniformly calculated for all franchisees and is non-refundable upon payment.

#### Multi-Unit Development Fee

If we award you multi-unit development rights to develop more than one Coffee House, you must sign our Multi-Unit Development Agreement ("MUDA") in the form attached as Exhibit C to this disclosure document. The minimum number of units required to develop Coffee Houses under the MUDA is three (3) units. Currently, we offer a reduction of your Initial Franchise Fee to $30,000 for your second franchise developed after the first franchised unit; your third franchise developed will be $25,000. Each initial franchise fee for each additional franchise developed after the third franchised unit is $20,000. For example, if you elect to development three Coffee Houses, the Development Fee will be $104,000 calculated as $49,500 + $30,000 for the second unit + $25,000 for the third unit. We reserve the right to cancel or modify any incentive program or discount at any time, provided you execute the MUDA simultaneously with the execution of your first franchise agreement.

When you sign the MUDA, you will sign the Franchise Agreement for the first Coffee House, and we will credit the applicable portion of the Development Fee to satisfy payment in full for the related initial franchise fee. When you sign each additional Franchise Agreement under the MUDA, we will credit the applicable portion of your Development Fee to satisfy payment in full for the related initial franchise fee. The Development Fee is calculated uniformly for all franchisees and is nonrefundable upon payment.

#### Initial Inventory

Before opening your Ella Coffee House, you must purchase your Initial Inventory Package from us. The Initial Inventory Package includes, among other things, the initial proprietary coffee, supplies, branded paper products, and merchandise necessary to open your Coffee House. The current cost of the Initial Inventory Package ranges from $24,600 to $53,000. This cost is nonrefundable and payable when you submit your purchase order.

Question 14

What are the ongoing monthly fees for Ella Cafe (Item 6) and how do they compare to the initial franchise fee (Item 5)?

Accepted Answer

| INITIAL FRANCHISE FEE:          | $49,500.           |                               |  |
| ROYALTY FEE:                    |                     | 7% of your Gross Sales.       |  |
| BRAND MARKETING FEE:            |                     | Up to 3% of your Gross Sales. |
| LOCAL ADVERTISING:              |                     | Up to 3% of your Gross Sales. |
When you sign your franchise agreement, you must pay us $49,500 as the initial franchise fee ("Initial Franchise Fee"). The initial franchise fee is uniformly calculated for all franchisees and is non-refundable upon payment.

If we award you multi-unit development rights to develop more than one Coffee House, you must sign our Multi-Unit Development Agreement ("MUDA") in the form attached as Exhibit C to this disclosure document. The minimum number of units required to develop Coffee Houses under the MUDA is three (3) units. Currently, we offer a reduction of your Initial Franchise Fee to $30,000 for your second franchise developed after the first franchised unit; your third franchise developed will be $25,000. Each initial franchise fee for each additional franchise developed after the third franchised unit is $20,000.

Before opening your Ella Coffee House, you must purchase your Initial Inventory Package from us. The Initial Inventory Package includes, among other things, the initial proprietary coffee, supplies, branded paper products, and merchandise necessary to open your Coffee House. The current cost of the Initial Inventory Package ranges from $24,600 to $53,000.

Question 15

What is the relationship between the Ella Cafe's initial franchise fee (Item 5) and the multi-unit development fee (Item 5) if a franchisee wants to expand?

Accepted Answer

Franchise Fee

When you sign your franchise agreement, you must pay us \$49,500 as the initial franchise fee ("Initial Franchise Fee"). The initial franchise fee is uniformly calculated for all franchisees and is non-refundable upon payment.

#### Multi-Unit Development Fee

If we award you multi-unit development rights to develop more than one Coffee House, you must sign our Multi-Unit Development Agreement ("MUDA") in the form attached as Exhibit C to this disclosure document. The minimum number of units required to develop Coffee Houses under the MUDA is three (3) units. Currently, we offer a reduction of your Initial Franchise Fee to \$30,000 for your second franchise developed after the first franchised unit; your third franchise developed will be \$25,000. Each initial franchise fee for each additional franchise developed after the third franchised unit is \$20,000. For example, if you elect to development three Coffee Houses, the Development Fee will be \$104,000 calculated as \$49,500 + \$30,000 for the second unit + \$25,000 for the third unit. We reserve the right to cancel or modify any incentive program or discount at any time, provided you execute the MUDA simultaneously with the execution of your first franchise agreement.

When you sign the MUDA, you will sign the Franchise Agreement for the first Coffee House, and we will credit the applicable portion of the Development Fee to satisfy payment in full for the related initial franchise fee. When you sign each additional Franchise Agreement under the MUDA, we will credit the applicable portion of your Development Fee to satisfy payment in full for the related initial franchise fee. The Development Fee is calculated uniformly for all franchisees and is nonrefundable upon payment.

Question 16

What happens if an Ella Cafe franchisee cancels a scheduled on-site training program?

Accepted Answer

- **5.6 On Site Training Cancellation Fees.** If Franchisor or its representative is schedule to conduct an on-site training program, or scheduled for a visit at the Franchisee's location for training or other reasons, or if the Franchisee register for a training program and Franchisee subsequently cancel, fail to attend, fail to have the appropriate parties attend, or fail to stay for the entire training program then Franchisee shall pay the Franchisor, their then-current on-site training cancellation fee (the "On-Site Training Cancellation Fee"). The On-Site Training Cancellation Fee may vary depending upon the type of schedule training program and how far in advance you

![](_page_69_Picture_0.jpeg)

notify the Franchisor in writing of the cancellation and the cost and expense incurred in rescheduling our travel arrangements.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 17

What happens if the Principal Executive of an Ella Cafe franchise fails to attend more than three consecutive required meetings?

Accepted Answer

or

![](_page_74_Picture_0.jpeg)

to report a complaint about Franchisee's Coffee House, the parties agree that Franchisor may, in its discretion, compensate the customer in such manner as Franchisor determines appropriate, and Franchisee will reimburse Franchisor the amount of such compensation upon demand by Franchisor.

- (f) Attend, and cause Principal Executive to attend, Franchisor's Conference.
- (g) Purchase and use all operations-related programs or materials Franchisor requires, at its sole discretion. If such programs or materials are supplied by third-party vendors, Franchisee will pay all costs and/or fees associated with these programs or materials.
- (h) Comply with all laws pertaining to sending emails, including but not limited to the Controlling the Assault of Non-solicited Pornography and Market Act of 2003 (CAN-SPAM Act).
  - (i) Franchisee will only operate the approved Coffee House and no other business from the Location.

#### **7.2 Principal Executive; District Manager.**

- (a) Upon the execution of this Agreement, Franchisee must designate, and retain at all times during the Term of this Agreement, an individual to serve as Franchisee's Principal Executive. If Franchisee is an individual or general partnership, the Principal Executive will be the individual Franchisee or one of the general partners.

Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 39–40)

Question 18

Under what circumstances does Ella Cafe charge a $500 Non-Compliance fee?

Accepted Answer

| Type of Fee1 | Amount | Due Date | Remarks |
|---|---|---|---|
| Software | Currently, $100 - | Monthly |  |
| Subscription | $200 per month |  |  |
| Non-Compliance | $500 | On demand |  |
| Fee |  |  |  |
| Customer Rewards, and Gift Cards | Currently not implemented by us but may be implemented in future | As invoiced | Fees for access management of customer rewards, and/or gift card system and redemption. |
| Reimbursement | Amount that we spend on your behalf, plus 10% |  |  |
| Late Fee | $100 plus interest on the unpaid amount at a rate equal to 18% per year (or, if such payment exceeds the maximum allowed by law, then interest at the highest rate allowed by law) | On demand | We may charge a late fee if you fail to make a required payment when due. |
| Insufficient Funds Fee | $30 (or, if such amount exceeds the maximum allowed by law, then the maximum allowed by law) | On demand | We may charge an insufficient funds fee if a payment made by you is returned because of insufficient funds in your account. |
| Costs Of Collection | Our actual costs Our actual costs | As incurred |  |
| Special Support Fee | Our then-current fee, plus our expenses. Currently, $600 per day. | On demand |  |

Source: Item 6 — OTHER FEES (FDD pages 10–15)

Question 19

Does the Ella Cafe agreement allow for third-party beneficiaries, and if so, under what conditions?

Accepted Answer

per and its Affiliates are in compliance with this Agreement and all other agreements with Franchisor or its Affiliates; (d) Developer pays

![](_page_135_Picture_0.jpeg)

Franchisor its reasonable attorneys' fees incurred to document such transfer; and (e) Developer executes a general release in a form satisfactory to Franchisor of any and all claims against Franchisor and its Affiliates and their respective officers, directors, managers, shareholders, agents, and employees in their corporate and individual capacities, including, without limitation, claims arising under federal, state, and local laws, rules, and ordinances; provided, however, that any release will not be inconsistent with any state law regulating franchising.

- **8.3.** Transfer by Developer and/or Owners. Developer understands and acknowledges that the rights and duties set forth in this Agreement are personal to Developer and that Franchisor has granted rights under this Agreement in reliance on the business skill, financial capacity, and personal character of Developer and its Owners. Accordingly, neither Developer nor any Owner, nor any successor or assign of Developer or any Owner, will sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise dispose of or encumber any direct or indirect interest in this Agreement or in the Business Entity without the prior written consent of Franchisor. Franchisor will not unreasonably withhold its consent to a transfer, but may condition its consent on satisfaction of any or all of the following.
- 8.3.1. Developer has provided Franchisor the following at least 120 days prior to the proposed closing date of the proposed transfer: (a) written request for Franchisor's consent to the transfer; (b) payment of the non-refundable transfer fee in the amount set forth in the Key Terms, plus reimbursement of Franchisor's reasonable attorneys' fees; and (c) a copy of the proposed asset purchase/transfer agreements, including sale terms.
- 8.3.2. The transferee has demonstrated to Franchisor's satisfaction that the transferee meets Franchisor's then-current educational, managerial, and business standards; possesses a good moral character, business reputation, and credit rating; has the aptitude and ability to operate the Coffee House; and meets Franchisor's then-current financial requirements to become an Ella Café developer.
- 8.3.3.

Source: Item 23 — RECEIPTS (FDD pages 50–181)

Question 20

When does Ella Cafe amend Attachment 2 to include the Location and a description of the Designated Area surrounding the Location?

Accepted Answer

|  | Upon Franchisee’s acquisition of the Location for the Coffee House, |
|---|---|
| Franchisor will amend Attachment 2 to include the Location and a description of the Designated |  |
| Area surrounding the Location or will memorialize such information in another form of written |  |
| communication, signed by Franchisor and Franchisee. As long as Franchisee is in full compliance |  |
| with this Agreement and any other agreement between Franchisee and Franchisor or its Affiliates, |  |

Source: Item 23 — RECEIPTS (FDD pages 50–181)

Question 21

For Ella Cafe area developers, when are development fees and initial payments deferred?

Accepted Answer

Item 5 has been supplemented by adding the following language:
- "Based upon the franchisor's financial condition, the Maryland Securities Commissioner has required a financial assurance. Therefore, all initial fees and payments owed by franchisees shall be deferred until the franchisor completes its pre-opening obligations under the franchise agreement. In addition, all development fees and initial payments by area developers shall be deferred until the first franchise under the development agreement opens."

Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 24–33)

Question 22

For Ella Cafe area developers in Maryland, when are development fees and initial payments deferred until?

Accepted Answer

- 1. Item 5 has been supplemented by adding the following language:
  - "Based upon the franchisor's financial condition, the Maryland Securities Commissioner has required a financial assurance. Therefore, all initial fees and payments owed by franchisees shall be deferred until the franchisor completes its pre-opening obligations under the franchise agreement. In addition, all development fees and initial payments by area developers shall be deferred until the first franchise under the development agreement opens."

Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 24–33)

Question 23

Besides fee obligations, will the operational characteristics of an Ella Cafe franchise business be similar to the affiliate-owned outlet?

Accepted Answer

- (5) Other than your fee obligations under the signed Franchise Agreement, as disclosed in this financial representation, operational characteristics of your Franchise Business will be similar to that of operational characteristics of our affiliate owned outlet.

Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 45–47)

Question 24

Besides full compliance with the agreement, are there any other agreements that the Ella Cafe franchisee must comply with to maintain exclusive rights in the Designated Area?

Accepted Answer

As long as Franchisee is in full compliance with this Agreement and any other agreement between Franchisee and Franchisor or its Affiliates, then except as otherwise expressly provided in this Agreement (including Section 2.4. of this

Source: Item 22 — CONTRACTS (FDD page 50)

Question 25

Besides the listed coverages, what other insurance might Ella Cafe require for a franchise?

Accepted Answer

ers' compensation insurance) shall expressly name Franchisor as an additional insured, grantor of franchise and loss payee and all shall contain a waiver of all subrogation rights against Franchisor and its successors and assigns. In addition to any other insurance that may be required by applicable law, or by lender or lessor, Franchisee shall procure:

- 1. Coverage against direct physical loss or damage to real and personal property (including but not limited to computers, consoles, gaming equipment, servers), including improvements and betterments, written on a special form peril basis, including flood and earthquake,if the relevant property is situated in a flood or earthquake zone, in an amount equal to 100% of the Franchised Businesses property value;
- 2. Comprehensive general liability insurance, written on an occurrence basis, extended to include contractual liability, products and completed operations, and personal and advertising injury, with a combined bodily injury and property damage limit of at least \$1,000,000 per occurrence, \$2,000,000 in aggregate;
- 3. Statutory workers' compensation insurance and employers' liability insurance as required by the law of the state in which the Franchised Business is located, including statutory workers' compensation limits and employers' liability limits of at least \$1,000,000;
- 4. Business interruption equal to 12 months of your net income and continuing expenses including royalty fees;
- 5. Commercial umbrella liability insurance with total liability limit of at least \$1,000,000;
- 6. Cyber Insurance in the amount of at least \$1,000,000 protecting against first party and third-partyclaims;
- 7. Employer practices liability insurance with a limit of at least \$2,000,000 including actions of athird-party and a minimum of \$100,000 for wage and hour disputes; and
- 8. All other insurance that we require in the Manual or that is required by law or by the lease orsublease for the Franchised Business.

Franchisor reserves the right to require Franchisee to obtain insurance policies to protect against cybersecurity threats, and accordingly, to require that Franchisor is named as additional insured on these cybersecurity insurance policies. Franchisor's insurance requirem

Source: Item 22 — CONTRACTS (FDD page 50)

Question 26

Can Ella Cafe charge a fee for in-person support provided to the franchisee?

Accepted Answer

If Franchisee requests, Franchisor will provide advice to Franchisee (by telephone or electronic communication) regarding improving and developing Franchisee's business, and resolving operating problems Franchisee encounters, to the extent Franchisor deems reasonable. If Franchisor provides in-person support in response to Franchisee's request, Franchisor may charge its then-current fee plus any out-of-pocket expenses (such as travel, lodging, and meals for employees providing onsite support).

Source: Item 22 — CONTRACTS (FDD page 50)

Question 27

Can Ella Cafe condition its approval of a Coffee House relocation on the payment of a minimum fee during the period the Coffee House is not in operation?

Accepted Answer

|  | Franchisee will not relocate the Coffee House without Franchisor’s express |
|---|---|
| prior written consent. If Franchisee is unable to continue the operation of the Coffee House |  |
| Location because of the occurrence of an event of Force Majeure (or for other reasons not |  |
| constituting an event of default under this Agreement), Franchisee may request Franchisor’s |  |
| consent to relocate the Coffee House to another location in the Designated Area. Franchisor’s |  |
| approval may not be unreasonably withheld but may be conditioned upon the payment of an agreed |  |
| minimum fee to Franchisor during the period in which the Coffee House is not in operation. |  |

Source: Item 23 — RECEIPTS (FDD pages 50–181)

Question 28

Can Ella Cafe condition its approval of a relocation on the payment of a minimum fee?

Accepted Answer

Franchisee will not relocate the Coffee House without Franchisor's express prior written consent.

If Franchisee is unable to continue the operation of the Coffee House at the Location because of the occurrence of an event of Force Majeure (or for other reasons not constituting an event of default under this Agreement), Franchisee may request Franchisor's consent to relocate the Coffee House to another location in the Designated Area.

Franchisor's approval may not be unreasonably withheld but may be conditioned upon the payment of an agreed minimum fee to Franchisor during the period in which the Coffee House is not in operation.

Selection of the relocation site and Coffee House construction, renovation, and opening procedures and timelines will be governed by this Article 6.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 29

What are the conditions that an Ella Cafe franchisee must meet to be eligible for renewal of the franchise agreement?

Accepted Answer

d these provisions in the agreements attached to this disclosure document.

| Provision | Section in franchise or | Summary |
|---|---|---|
|  | other agreement |  |
| a. Length of the | Franchise Agreement (FA): | 10 years from date of franchise |
| franchise term |  | agreement. |
|  | Section 3.1 |  |
|  | Multi-Unit Development |  |
|  | Agreement (MUDA): |  |
|  | Section 2.1 |  |
|  |  |  |
| b. Renewal or extension of the term | FA: Section 3.2 | You may obtain a successor franchise agreement for up to two additional 5- year terms. |
|  | MUDA: none |  |
|  |  |  |
| c. Requirements for | FA: Section 3.2, 3.3 | In order to renew you must: (a) have fully |
| franchisee to renew or |  |  |
| extend |  |  |
|  | MUDA: none | complied with the Franchise Agreement; (b) |
|  |  | have updated your Coffee House equipment; |
|  |  | (c) have satisfied all monetary obligations |
|  |  | owed to us or our affiliates including |
|  |  | payment of renewal fee in the amount of |
|  |  | 50% of than current initial franchise fee; (d) |
|  |  | not be in default of any provision of the |
|  |  | Franchise Agreement or any other |
|  |  | agreement between you and us; (e) have |
|  |  | timely notified us of your intent to renew; |
|  |  | (f) sign a current Franchise Agreement, |
|  |  | which may have materially different terms |
|  |  | and conditions (including higher royalty |
|  |  | fees and higher marketing Fees); (g) comply |
|  |  | with current qualifications, (h) comply with |
|  |  | any training requirements; and (i) sign a |
|  |  | then current form of general release, and |
|  |  | you or principals must also sign a then |
|  |  | current form of general release. |
| d.

Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 41–45)

Question 30

What are the conditions that must be met for an Ella Cafe franchisee to open their Coffee House for business with the franchisor's permission?

Accepted Answer

Franchisee may open the Coffee House for business only with Franchisor's prior, written permission, which will be granted only if: **(a)** all amounts due Franchisor under this Agreement have been paid, **(b)** the Coffee House has been constructed and equipped according to Franchisor's Standards and specifications, **(c)** all of Franchisee's pre-opening and training obligations have been satisfied, **(d)** Franchisor has received from Franchisee a signed ACH Authorization (Attachment 4); **(e)** Franchisor has received from Franchisee a fully-executed copy of the Coffee House lease containing the mandatory lease terms described in Exhibit D, or the contract of sale for the Location; **(f)** Franchisor has received from Franchisee certificates of insurance as required by Section 7.; and **(g)** Franchisee is otherwise in good standing under this Agreement and has met all of Franchisor's pre-opening requirements.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 31

What conditions may Ella Cafe place on relocation approval?

Accepted Answer

Franchisee will not relocate the Coffee House without Franchisor's express prior written consent.

If Franchisee is unable to continue the operation of the Coffee House at the Location because of the occurrence of an event of Force Majeure (or for other reasons not constituting an event of default under this Agreement), Franchisee may request Franchisor's consent to relocate the Coffee House to another location in the Designated Area.

Franchisor's approval may not be unreasonably withheld but may be conditioned upon the payment of an agreed minimum fee to Franchisor during the period in which the Coffee House is not in operation.

Selection of the relocation site and Coffee House construction, renovation, and opening procedures and timelines will be governed by this Article 6.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 32

What are the conditions that trigger the Records Audit fee for Ella Cafe franchisees?

Accepted Answer

Picture_0.jpeg)

| Type of Fee1 | Amount | Due Date | Remarks |
|---|---|---|---|
| Customer Complaint Resolution | Our expenses | On demand | We may take any action we deem appropriate to resolve a customer complaint about your business. If we respond to a customer complaint, we may require you to reimburse us for our expenses. |
| Records Audit | Our actual cost | On demand | Payable only if (1) we audit you because you have failed to submit required reports or other non-compliance, or (2) the audit concludes that you under-reported gross sales by more than 3% for any 4-week period.

Source: Item 6 — OTHER FEES (FDD pages 10–15)

Question 33

What are the conditions under which an Ella Cafe franchisee's right to develop additional Coffee Houses under a MUDA is subject to?

Accepted Answer

You do not have the right to establish additional franchised Coffee House unless you sign a MUDA in the form attached as Exhibit C to this disclosure document for at least five units. If you and we sign a MUDA, then you will have the right to establish a mutually-agreed number of additional Coffee Houses on a mutually-agreed schedule. Under the MUDA, your right to develop additional Coffee Houses is subject to the following: (1) you must comply with the mutually-agreed development schedule, (2) you must have sufficient financial and organizational capacity to develop, open, operate, and manage each additional ELLA business, (3) you must be in compliance with all brand requirements at your open Ella Coffee House business(es), and (4) you must not be in default under any other agreement with us. We will approve the location of future sites and territories for those sites, and our then-current standards for sites and territories will apply. You are not obligated to develop additional Coffee Houses under the MUDA, and you may terminate it any time without penalty; however, if you do not meet your development schedule in the MUDA, we have the right to terminate your right to develop additional coffee houses.

If you fail to meet any of your obligations under the MUDA, including the development obligations, we (i) terminate or modify any territorial protections granted to you, (ii) reduce the size of the Development Area, )iii) reduce the number of Coffee Houses which you may establish under the Development Schedule. There are no circumstances that permit us to modify your territorial rights under the MUDA.

Source: Item 12 — TERRITORY (FDD pages 33–35)

Question 34

What is the consequence if the Ella Cafe franchisee fails to notify the franchisor in writing prior to any change in the ownership information?

Accepted Answer

- **2.4 Franchisee Control.** Franchisee represents that Attachment 1 (i) identifies each owner, officer and director of Franchisee, and (ii) describes the nature and extent of each owner's interest in Franchisee.

If any information on Attachment 1 changes (which is not a Transfer), Franchisee shall notify Franchisor within 10 days.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 35

For Ella Cafe, what is the dependency between having a District Manager and the Principal Executive's full-time commitment?

Accepted Answer

al Executive will be the individual Franchisee or one of the general partners. If Franchisee is a Business Entity, the Principal Executive will be an individual with at least a 10% equity interest in the Business Entity. The Principal Executive must have full control over day-to-day Coffee House management and operations. Unless a District manager is appointed, as described below: (a) the Principal Executive must attend and successfully complete Franchisor's initial training program and all additional training that Franchisor requires, to Franchisor's satisfaction; and (b) the Principal Executive must devote his or her full-time efforts to Coffee House operations and must not engage in any other business or activity, directly or indirectly, that requires substantial management responsibility or time commitment. Franchisor must approve the Principal Executive as meeting its then-current qualifications for such position. If the Principal Executive ceases to serve in, or no longer qualifies for, such position, or transfers his or her equity interest, Franchisee must designate another qualified person to serve as Franchisee's Principal Executive within 30 days after the date the prior Principal Executive ceases to serve or no longer qualifies to serve. Any proposed replacement Principal Executive must successfully complete the initial training program and such other training required by Franchisor and be approved by Franchisor before assuming his or her position as Principal Executive and, in no event, later than 90 days after the previous Principal Executive ceased to serve in such position.
- (b) If the Principal Executive will not devote full-time efforts to the management and operation of the Coffee House governed by this Agreement then, in addition to the Principal Executive, Franchisee must appoint an individual to serve as its District Manager. Franchisee's District Manager must have full control over day-to-day Coffee House management and operations.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 36

What is the dependency between mediation and litigation for Ella Cafe?

Accepted Answer

To the extent that litigation is permitted in accordance with the above provisions, or in the event that any claim or controversy is not finally resolved through mediation, then the following provisions will apply:

- (a) **JURISDICTION AND VENUE.

FOR ANY CLAIMS, CONTROVERSIES, AND/OR DISPUTES WHICH ARE NOT FINALLY RESOLVED THROUGH MEDIATION AS PROVIDED ABOVE, FRANCHISEE, OWNERS, AND PRINCIPALS IRREVOCABLY SUBMIT THEMSELVES TO THE JURISDICTION OF THE STATE AND THE FEDERAL DISTRICT COURTS LOCATED IN THE STATE, COUNTY, OR JUDICIAL DISTRICT IN WHICH FRANCHISOR'S PRINCIPAL PLACE OF BUSINESS IS LOCATED.

FRANCHISEE, OWNERS, AND PRINCIPALS HEREBY WAIVE ALL QUESTIONS OF PERSONAL JURISDICTION

Source: Item 22 — CONTRACTS (FDD page 50)

Question 37

What is the dependency for the payment of initial fees for an Ella Cafe franchise in Maryland, according to the amendment?

Accepted Answer

2. Section 3.1 of the Franchise Agreement is amended to reflect the following:

"Based upon the franchisor's financial condition, the Maryland Securities Commissioner has required a financial assurance. Therefore, all initial fees and payments owed by franchisees shall be deferred until the franchisor completes its pre-opening obligations under the franchise agreement" ("**Fee Deferral Requirement**"). Therefore, notwithstanding anything to the contrary in this Section 3.1 of the Franchise Agreement, payment of the initial franchise fee and the preopening initial inventory and equipment package fee are due immediately at such time as when Franchisor has met its pre-opening obligations to Franchisee, and Franchisee has commenced operation of the Franchised Business.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 38

What is the dependency between receiving all information and materials and the Ella Cafe franchisor providing on-site evaluation assistance?

Accepted Answer

- (iii) Franchisor may conduct on-site site selection evaluations, provide geographic market data, or lease availability on its own initiative or in response to Franchisee's reasonable request, if deemed necessary by Franchisor, but Franchisor will not provide assistance or consider a request for an on-site evaluation until all information and materials described in Section 6.2. below have been received.

If Franchisor conducts an on-site evaluation of a proposed site(s) or provides in-person site selection assistance, Franchisee must reimburse Franchisor its related outof-pocket costs, including the costs of all transportation, lodging, and meals.

Ultimately, site selection is solely Franchisee's responsibility.

- **6.2.

Franchise Site Application**.

For each proposed site that Franchisee identifies, Franchisee must deliver to Franchisor in the form specified by Franchisor, a description of the site, evidence satisfactory to Franchisor demonstrating that the site satisfies Franchisor's site selection guidelines, and such other information and materials as Franchisor may reasonably require, including, but not limited to, copies of a proposed lease or a contract of sale for the site.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 39

Can Ella Cafe determine the prices charged by Ella Cafe franchisees for goods and services?

Accepted Answer

- D. *Establishing prices*. Upon your request, we will provide recommended prices for products and services. (Section 5.5). We have the right to determine prices charged by our franchisees for goods and services (but only to the extent permitted by applicable law).

Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 24–33)

Question 40

What must an Ella Cafe Developer do to ensure that neither the Franchisor nor its Affiliates will establish or authorize another entity to establish a Coffee House in the Development Area?

Accepted Answer

- **1.2.** Development Area. As long as Developer is in full compliance with this Agreement and any other agreement between Developer and/or its Affiliates and Franchisor and/or its Affiliates, then except as otherwise expressly provided in this Agreement (including Section 1.3. of this Agreement), neither Franchisor nor any Affiliate of Franchisor will establish, or authorize any person or entity other than Developer to establish, a Coffee House that is the same model as those developed by the Developer in the Development Area during the Term of this Agreement. - **Retained Rights**. The rights granted to Developer under this Agreement are nonexclusive, 1.3. and Franchisor and its Affiliates have and retain all rights within and outside the Development Area, except those expressly granted to Developer in this Agreement. Accordingly, Franchisor, its Affiliates, and any other authorized person or entity will have the right, among others, operate, and license others to (a) operate or license others to operate an Coffee House that is different model than the one operated by you at any location whether inside or outside of the Development Area and in any Reserved Area whether located inside or outside the Development Area (b) to operate, and license others to operate, Coffee Houses at any location outside the Development Area and in any Reserved Area (whether located inside or outside the Development Area), including Coffee Houses that are adjacent to or surrounded by the Development Area, (c) to advertise and promote the System in the Development Area, (d) to operate, and license others to operate, Coffee House at any locations in any Reserved Area, including Reserved Areas that are in the Development Area, (e) to engage, directly or indirectly, at wholesale, retail, or otherwise, in the production, distribution, license, and sale of any and all food, beverages, or other services and products, under the Marks or under other names or marks through any method of distribution, other than a Ella Café Coffee House, regardless of the competitive impact, and including, but not limited to, from vending machines and kiosks, food trucks, grocery stores, and other food retailers and through mail order catalogs and the Internet, regardless of the proximity to, or the competitive impact on, coffee houses developed by Developer in the Development Area. Source: Item 23 — RECEIPTS (FDD pages 50–181)

Question 41

Can the Ella Cafe Developer share, divide, sub-franchise, sublicense, or transfer the development rights granted, and if so, under what conditions?

Accepted Answer

ice marks, and trademarks as are now designated and may hereafter be designated by Franchisor in writing for use in connection with the System ("Marks"). - D. Developer desires to acquire the right to develop multiple franchised Coffee Houses, each identified in the Key Terms, that will operate using the System and Marks, (individually and collectively "Coffee House" or "Coffee Houses"), and Franchisor desires to grant Developer such rights, all pursuant to the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the promises and other good and valuable consideration contained in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: #### **AGREEMENT** #### 1. GRANT **1.1.** Grant of Development Rights. Franchisor hereby grants to Developer, and Developer hereby accepts the right and obligation, to develop in the Development Area identified in the Key Terms, the number of new Coffee Houses set forth in the Development Schedule (identified in the Key Terms). Each Coffee House to be developed must be developed and operated pursuant to a separate Franchise Agreement to be entered into between Developer (or Developer's Affiliate, if approved by Franchisor in writing) and Franchisor in accordance with Section 4.1. This Agreement ![](_page_129_Picture_0.jpeg) does not grant Developer any right or license to use any of the Marks. Developer's rights to operate a Coffee House and use the Marks derive solely from the Franchise Agreements that Developer or its Affiliates enter into under this Agreement. The development rights granted under this Agreement belong solely to Developer. Developer will not share them, divide them, sub-franchise or sublicense them, or transfer them, except in accordance with the transfer provisions of this Agreement. - **1.2.** Development Area. As long as Developer is in full compliance with this Agreement and any other agreement between Developer and/or its Affiliates and Franchisor and/or its Affiliates, then except as otherwise expressly provided in this Agreement (including Section 1.3. of this Agreement), neither Franchisor nor any Affiliate of Franchisor will establish, or authorize any person or entity other than Developer to establish, a Coffee House that is the same model as those developed by the Developer in the Development Area during the Term of this Agreement. - **Retained Rights**. The rights granted to Developer under this Agreement are nonexclusive, 1.3. and Franchisor and its Affiliates have and retain all rights within and outside the Development Area, except those expressly granted to Developer in this Agreement. Source: Item 23 — RECEIPTS (FDD pages 50–181)

Question 42

Does Ella Cafe have the discretion to collect taxes from the franchisee in the same manner as royalty fees?

Accepted Answer

In addition to all other payments provided for in this Agreement, Franchisee must pay Franchisor and its Affiliates and all of Franchisee's third-party vendors, suppliers, and landlord promptly when due:

- (i) All amounts advanced by Franchisor or which Franchisor has paid, or for which it has become obligated to pay on Franchisee's behalf for any reason whatsoever.

- (ii) The amount of all sales taxes, use taxes, personal property taxes, and similar taxes, which are or may be imposed upon Franchisee and required to be collected or paid by Franchisee **(a)** because of Franchisee's Gross Sales, or **(b)** because of Initial Franchise Fees, Royalty Fees, or advertising fees (and Franchisee Advertising Co-op dues, if any) collected by Franchisor from Franchisee (but excluding ordinary income taxes).

Franchisor, in its discretion, may collect the taxes in the same manner as Royalty Fees are collected and promptly pay the tax collections to the appropriate governmental authority; provided, however, that unless Franchisor so elects, it will be Franchisee's responsibility to pay all sales, use, or other taxes now or hereinafter imposed by any governmental authorities on Initial Franchise Fees, Royalty Fees, and advertising fees.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 43

What is the effect of a final court order on the post-term non-competition agreement for Ella Cafe?

Accepted Answer

hip or association with, any fast casual, quick service, or full service coffee house, or retail Coffee House of any type, that offers coffee and/or assorted café items as a primary menu item or that derives more than 25% of its revenue from the sale of coffee and/or assorted café items, other than an Coffee House operated pursuant to a then-currently effective Franchise Agreement with Franchisor, at any location within the United States, its territories or commonwealths, or any other country, province, state, or geographic area in which Franchisor or its Affiliates have used, sought registration of, or registered the Marks or similar marks or operate or license others to operate a business under the Marks or similar marks. - 10.2. Noncompetition After Expiration or Termination of Agreement. Commencing upon the later of: (a) a transfer permitted under Section 8. of this Agreement, expiration of this Agreement (without renewal), or termination of this Agreement (regardless of the cause for termination); or (b) a final court order (after all appeals have been taken) with respect to any of ![](_page_140_Picture_0.jpeg) the foregoing events or with respect to enforcement of this Section 10.2., and continuing for an uninterrupted period of two years thereafter, Developer will not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, persons, or legal entity, own, maintain, advise, operate, engage in, be employed by, make loans to, invest in, provide any assistance to, or have any interest in (as an owner or otherwise) or relationship or association with any casual, fast-casual, or quick-service coffee house, retail Coffee House, coffee/food truck, kiosk, cart, or store inside store of any type, that offers coffee and/or assorted café items as a primary menu item or that derives more than 25% of its revenue from the sale of coffee and/or assorted café items, other than a Ella Coffee Company, LLC Coffee House operated pursuant to a then-currently effective Franchise Agreement with Franchisor, that: (i) is, or is intended to be, located at the location of the former Location; (ii) is within a five-mile radius of the former Location; Source: Item 23 — RECEIPTS (FDD pages 50–181)

Question 44

What is the effect of the franchisor's financial condition on the payment of initial fees for an Ella Cafe franchise?

Accepted Answer

If you are unable to open your Coffee House by the Opening Date, we are not obligated to extend your Opening Date deadline. If you have sent a written extension request to us at least 60 days prior to your Opening Date, we may in our sole discretion grant you an extension. If you do not open the Coffee House by the Opening Date, and/or do not request and/or receive an extension request, we may unilaterally terminate the Franchise Agreement and we are not required nor do you have the right to any fees paid to us.

Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 24–33)

Question 45

What is the effect of a permitted transfer under Section 8 on the post-term non-competition agreement for Ella Cafe?

Accepted Answer

the foregoing events or with respect to enforcement of this Section 10.2., and continuing for an uninterrupted period of two years thereafter, Developer will not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, persons, or legal entity, own, maintain, advise, operate, engage in, be employed by, make loans to, invest in, provide any assistance to, or have any interest in (as an owner or otherwise) or relationship or association with any casual, fast-casual, or quick-service coffee house, retail Coffee House, coffee/food truck, kiosk, cart, or store inside store of any type, that offers coffee and/or assorted café items as a primary menu item or that derives more than 25% of its revenue from the sale of coffee and/or assorted café items, other than a Ella Coffee Company, LLC Coffee House operated pursuant to a then-currently effective Franchise Agreement with Franchisor, that: (i) is, or is intended to be, located at the location of the former Location; (ii) is within a five-mile radius of the former Location; or (iii) is within a five-mile radius of any other Coffee House operating under the System and Marks, that is in existence or under development at any location within the United States, its territories, or commonwealths, or any other country, province, state, or geographic area in which Franchisor or its Affiliates have used, sought registration of, or registered the Marks or similar marks, or operate or license others to operate a business under the Marks or similar marks, at the time of such expiration, termination, or transfer. If any Owner ceases to be an Owner of Developer for any reason during the Term of this Agreement, the foregoing covenant will apply to the departing Owner for a two-year period beginning on the date such person ceases to meet the definition of an Owner. The time periods relating to the obligations described in this Section 10.2. will be tolled during any period of noncompliance.

Source: Item 23 — RECEIPTS (FDD pages 50–181)

Question 46

In the event of Force Majeure affecting Ella Cafe, is the affected party liable for damages if they fail to give timely notice?

Accepted Answer

Force Majeure.

Upon the occurrence of an event of Force Majeure, the party affected thereby must give prompt notice thereof to the other party, together with a description of the event, the duration for which the party expects its ability to comply with the provisions of the Agreement to be affected, and a plan for resuming operation under the Agreement, which the party must promptly undertake and maintain with due diligence.

Such affected party will be liable for failure to give timely notice only to the extent of damage actually caused.

If an event of Force Majeure occurs, then Developer will continue to be obligated to pay to Franchisor any and all amounts it is obligated to pay in accordance with the terms of this Agreement prior to the occurrence of such event, and the Indemnitees will continue to be indemnified and held harmless by Developer in accordance with Section 7.2.

Except as provided in the immediately preceding sentence, neither party will be held liable for a failure to comply with any terms and conditions of this Agreement when such failure is caused by an event of Force Majeure.

Source: Item 23 — RECEIPTS (FDD pages 50–181)

Question 47

In the Ella Cafe franchisee agreement, what modification will be made to the General Release to ensure consistency with state laws regulating franchising?

Accepted Answer

HISOR:                          | FRANCHISEE:   |
|--------------------------------------|---------------|
| Ella Coffee Company, LLC,            |               |
| a Delaware limited liability company |               |
|                                      |               |
|                                      |               |
| By:                                  | By:           |
| Anthony Perera, President            | [name, title] |

![](_page_125_Picture_0.jpeg)

#### **EXHIBIT E**

#### **SAMPLE FORM OF GENERAL RELEASE**

This general release (the "General Release") is made and entered into on \_\_\_\_\_\_,\_\_\_\_ by and between Ella Coffee Company, LLC ("Franchisor"), \_\_\_\_ ("Franchisee"), \_\_\_\_ and **Error! R eference source not found.** (together with the Franchisee, the "Franchisee Parties"). For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Franchisee Parties agree as follows.

- 1. To the maximum extent permitted by applicable law, the Franchisee Parties on behalf of themselves and each of their past and present parents, subsidiaries, affiliates, predecessors, successors, assigns, officers, directors, shareholders, partners, owners, members, managers, agents, attorneys, employees, and representatives (together with the Franchisee Parties, the "Releasing Parties") do remise, release, waive, and forever discharge Ella Coffee Company, LLC, Cool Coffee Holdings, LLC, and each of their respective past and present parents, subsidiaries, affiliates, predecessors, successors, assigns, officers, directors, shareholders, partners, owners, members, managers, agents, attorneys, employees, and representatives (collectively, the "Franchisor Parties") from any and all claims, demands, obligations, liabilities, actions, proceedings, agreements, debts, demands, damages, accounts, charges, invoices, discounts, incentives, allowances, controversies, expenses, attorneys' fees, suits, arbitrations, and causes of action whatsoever, in law or equity, whether known or unknown, past, present, or future, which the Releasing Parties have, have had, claim to have, or may have against the Franchisor Parties including, but not limited to, any and all claims and damages in any way arising out of or related to (1) that franchise agreement between Ella C

Source: Item 22 — CONTRACTS (FDD page 50)

Question 48

Does an Ella Cafe franchisee need to provide proof of local marketing expenditure compliance?

Accepted Answer

- **9.6 Local Advertisement Expenditure.** Franchisee shall spend at least 2% of Gross Sales each month on marketing the Business; however, Franchisor reserves the right to require Franchisee to spend at least 3% of Gross Sales each month (the "Local Marketing expenditure").

Upon request of Franchisor, Franchisee shall furnish proof of its compliance with this Section.

Franchisor has the sole discretion to determine what activities constitute "marketing" under this Section.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 49

Is an Ella Cafe franchisee required to submit copies of federal and state income tax returns to the franchisor?

Accepted Answer

- **10.5.

Submission of Financial Statements and Tax Returns**.

No later than March 31 of each calendar year, Franchisee must provide Franchisor: **(a)** a copy of the previous year's annual profit and loss statements; **(b)** a copy of the previous year's sales tax returns; and **(c)** if requested, a copy of federal and state income tax returns for the previous year; provided, however, that if Franchisee is an individual, not a Business Entity, Franchisee may submit only those schedules to its personal tax returns which reflect the revenues and expenses of the Coffee House.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 50

Is an Ella Cafe franchisee responsible for paying sales, use, or other taxes on initial franchise fees, royalty fees, and advertising fees?

Accepted Answer

- (ii) The amount of all sales taxes, use taxes, personal property taxes, and similar taxes, which are or may be imposed upon Franchisee and required to be collected or paid by Franchisee **(a)** because of Franchisee's Gross Sales, or **(b)** because of Initial Franchise Fees, Royalty Fees, or advertising fees (and Franchisee Advertising Co-op dues, if any) collected by Franchisor from Franchisee (but excluding ordinary income taxes).

Franchisor, in its discretion, may collect the taxes in the same manner as Royalty Fees are collected and promptly pay the tax collections to the appropriate governmental authority; provided, however, that unless Franchisor so elects, it will be Franchisee's responsibility to pay all sales, use, or other taxes now or hereinafter imposed by any governmental authorities on Initial Franchise Fees, Royalty Fees, and advertising fees.

- (iii) All amounts due and owing (unless such amount is subject to a bona fide dispute) pursuant to Franchisee's agreements and contracts with all Designated Suppliers and Franchisee's other trade creditors and Franchisee's landlord.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 51

How can an Ella Cafe franchisee's contribution to a Market Cooperative affect their required local marketing spending?

Accepted Answer

Franchisee shall spend at least 2% of Gross Sales each month on marketing the Business; however, Franchisor reserves the right to require Franchisee to spend at least 3% of Gross Sales each month (the "Local Marketing expenditure").

Upon request of Franchisor, Franchisee shall furnish proof of its compliance with this Section.

Franchisor has the sole discretion to determine what activities constitute "marketing" under this Section.

Franchisor may, in its discretion, determine that if Franchisee contributes to a Market Cooperative, the amount of the contribution will be counted towards Franchisee's required spending under this Section.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 52

What is the Ella Cafe franchisee's obligation if an Indemnitee delays notifying them of an Action?

Accepted Answer

Any delay or failure by an Indemnitee to notify Franchisee of an Action shall not relieve Franchisee of its indemnity obligation except to the extent (if any) that such delay or failure materially prejudices Franchisee.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 53

What is the Ella Cafe franchisee's responsibility if the franchisor does not elect to collect taxes in the same manner as royalty fees?

Accepted Answer

The amount of all sales taxes, use taxes, personal property taxes, and similar taxes, which are or may be imposed upon Franchisee and required to be collected or paid by Franchisee **(a)** because of Franchisee's Gross Sales, or **(b)** because of Initial Franchise Fees, Royalty Fees, or advertising fees (and Franchisee Advertising Co-op dues, if any) collected by Franchisor from Franchisee (but excluding ordinary income taxes).

Franchisor, in its discretion, may collect the taxes in the same manner as Royalty Fees are collected and promptly pay the tax collections to the appropriate governmental authority; provided, however, that unless Franchisor so elects, it will be Franchisee's responsibility to pay all sales, use, or other taxes now or hereinafter imposed by any governmental authorities on Initial Franchise Fees, Royalty Fees, and advertising fees.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 54

For Ella Cafe franchises in Maryland, under what condition are initial fees and payments deferred?

Accepted Answer

#### *FOR THE STATE OF MARYLAND*

- 1. Item 5 has been supplemented by adding the following language:
  - "Based upon the franchisor's financial condition, the Maryland Securities Commissioner has required a financial assurance. Therefore, all initial fees and payments owed by franchisees shall be deferred until the franchisor completes its pre-opening obligations under the franchise agreement. In addition, all development fees and initial payments by area developers shall be deferred until the first franchise under the development agreement opens."

Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 24–33)

Question 55

Is the Ella Cafe Franchisor's approval for relocation guaranteed if the franchisee meets the requirements?

Accepted Answer

|  | Franchisee will not relocate the Coffee House without Franchisor’s express | 
|---|---| 
| prior written consent. If Franchisee is unable to continue the operation of the Coffee House |  | 
| Location because of the occurrence of an event of Force Majeure (or for other reasons not |  | 
| constituting an event of default under this Agreement), Franchisee may request Franchisor’s |  | 
| consent to relocate the Coffee House to another location in the Designated Area. Franchisor’s |  | 
| approval may not be unreasonably withheld but may be conditioned upon the payment of an agreed |  | 
| minimum fee to Franchisor during the period in which the Coffee House is not in operation. |  |

Source: Item 23 — RECEIPTS (FDD pages 50–181)

Question 56

For Ella Cafe, what happens if the District Manager ceases to serve in the position?

Accepted Answer

If the District Manager ceases to serve in such position, Developer must designate another qualified person to serve as its District Manager within 30 days after the date the prior District Manager ceases to serve.

Any proposed replacement District Manager must

![](_page_133_Picture_0.jpeg)

successfully complete the initial training program and such other training required by Franchisor before assuming his or her position as District Manager and, in no event, later than 90 days after the previous District Manager ceased to serve in such position.

Source: Item 23 — RECEIPTS (FDD pages 50–181)

Question 57

What happens if an Ella Cafe franchisee fails to identify a site acceptable to the franchisor by the Opening Date?

Accepted Answer

30 to 60 days after signing a Franchise Agreement. When the retail site is selected and approved by us, we will mutually agree on an "Opening Date" for your Coffee House, but the Opening Date must be no later than 365 days from the Effective Date of your Franchise Agreement.

If you execute a MUDA with us, you will be required to open a certain number of Franchised Businesses by specific dates that will be identified in a MUDA Development Schedule before you sign the MUDA.

If you are unable to open your Coffee House by the Opening Date, we are not obligated to extend your Opening Date deadline. If you have sent a written extension request to us at least 60 days prior to your Opening Date, we may in our sole discretion grant you an extension. If you do not open the Coffee House by the Opening Date, and/or do not request and/or receive an extension request, we may unilaterally terminate the Franchise Agreement and we are not required nor do you have the right to any fees paid to us.

#### Advertising

All advertising, marketing, marketing materials and all marketing mediums used by you in the marketing and promotion of your Coffee House must be pre-approved by us in writing and conform to our standards and specifications of the Manual for our System. In our discretion, we may make available to you approved marketing templates comprised of pre-approved ads, ad copy and digital media that you may utilize at your own expense. We are not required to spend any amount on your behalf on advertising in your Site Selection Area and we are not required to conduct any advertising on behalf of the franchise System or on your behalf.

![](_page_26_Picture_0.jpeg)

You may use your own advertising or marketing material only with our approval. To obtain our approval, you must submit any proposed advertising or marketing material at least 14 days prior to use. If we do not respond, the material is deemed rejected. If you develop any advertising or marketing materials, we may use those materials for any purpose, without any payment to you.

Currently, no advertising council has been established for the franchise system.

We do not currently have any local or regional advertising cooperatives. We have the right to require you to participate in a local or regional advertising cooperative. We will define the area of the cooperative based on media markets, or other geographic criteria that we deem appropriate. Each franchisee in the area would have one vote per Coffee House (unless the franchisee is in default under its franchise agreement).

Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 24–33)

Question 58

What happens if an Ella Cafe franchisee fails to open their Coffee House by the Opening Date and does not request or receive an extension?

Accepted Answer

If Franchisee fails to open the Coffee House by the Opening Date and/or does not request and/or does not receive an extension as provided for in this Section 6.9., then Franchisor may terminate this Agreement in accordance with Section 14.2.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 59

What happens if the Ella Cafe franchisee is not in full compliance with the agreement?

Accepted Answer

righted Works; or (f) violation of any provision of this Agreement concerning the preparation, service, appearance, or quality of ELLA or ELLA COFFEE HOUSE products.
- **14.4. Termination With 30-Day Cure Period**. Except as otherwise provided in this Section 13., Franchisor has the right to terminate this Agreement, which termination will become effective upon delivery of written notice of termination, if Franchisee fails to cure any curable default within 30 days after delivery of written notice.
- **14.5. Termination Related to Death or Permanent Incapacity**. Franchisor has the right to terminate this Agreement if an approved transfer as required by Section 15 is not effected within the designated time frame following a permanent disability.
- **14.6. Cross-Default**. Any default under any agreement between Franchisee or its Affiliates on the one hand and Franchisor or its Affiliates on the other hand, which are not cured within any applicable cure period, will be considered a default under this Agreement and will provide an independent basis for termination of this Agreement.
- **14.7. Additional Remedies**. In addition to, or in lieu of, termination of this Agreement, in its sole discretion, Franchisor may require the Coffee House to be closed during any cure period relating to a default based on public health and safety concerns.
- **14.8 Termination by Franchisee.** Franchisee may terminate this Agreement only if Ella Coffee House violates a material provision of this Agreement and fails to cure or to make substantial progress toward curing the violation within 30 days after receiving written notice from Franchisee detailing the alleged default. Termination by Franchisee is effective 10 days after Ella Coffee Company receives written notice of termination.
- **14.9 Effect of Termination.** Upon termination or expiration of this Agreement, all obligations that by their terms or by reasonable implication survive termination, including those pertaining to non-competition, confidentiality, indemnity, and dispute resolution, will remain in effect, and Franchisee must immediately:
  - (i) pay all amounts owed to Franchisor based on the operation of the Business through the effective date of termination or expiration.
  - (ii) return to Franchisor all copies of the Manual, Confidential Information and any and all other materials provided by Franchisor to Franchisee or created by a third party

![](_page_101_Picture_0.jpeg)

- for Franchisee relating to the operation of the Business, and all items containing any Marks, copyrights, and other proprietary items; and delete all Confidential Information and proprietary materials from electronic devices;
- (iii) notify the telephone, internet, email, electronic network, directory, and listing entities of the termination or expiration of Franchisee's right to use any numbers, addresses, domain names, locators, directories and listings associated with any of the Marks, and authorize their transfer to Franchisor or any new franchisee as may be directed by Franchisor, and Franchisee hereby irrevocably appoints Franchisor, with full power of substitution, as its true and lawful attorney-in-fact, which appointment is coupled with an interest; to execute such directions and authorizations as may be necessary or appropriate to accomplish the foregoing; and
- (iv) cease doing business under any of the Marks.
- **14.10 Remove Identification.** Within 30 days after termination or expiration, Franchisee shall at its own expense "de-identify" the Location so that it no longer contains the Marks, signage, or any trade dress of an Ella Coffee House business, to the reasonable satisfaction of Franchisor. Franchisee shall comply with any reasonable instructions and procedures of Franchisor for deidentification. If Franchisee fails to do so within 30 days after this Agreement expires or is terminated, Franchisor may enter the Location to remove the Marks and de-identify the Location. In this event, Franchisor will not be charged with trespass nor be accountable or required to pay for any assets removed or altered, or for any damage caused by Franchisor.
- **14.11 Unfair Competition**. If Franchisee operates any other business, Franchisee shall not use any reproduction, counterfeit, copy or colorable imitation of the Marks, either in connection with such other business or the promotion thereof, that is likely to cause confusion, mistake or deception, or that is likely to dilute Franchisor's rights in the Marks. Franchisee shall not utilize any designation of origin, description or representation that falsely suggests or represents an association or connection with Franchisor. This Section 14 is not intended as an approval of Franchisee's right to operate other businesses and in no way is it intended to contradict other sections of this Agreement. Franchisee shall make such modifications or alterations to the Coffee House (including changing telephone numbers) immediately upon termination or expiration of this Agreement as may be necessary to prevent any association between Franchisor or the System and any business subsequently operated by Franchisee or others at the Coffee House. Franchisee shall make such specific additional changes to the Coffee House as Franchisor may reasonably request for that purpose including, without limitation, removal of all physical and structural features identifying or distinctive to the System. If Franchisee fails or refuses to comply with the requirements of this Section 14, Franchisor has the right to enter upon the Coffee House for the purpose of making or causing to be made such changes as may be required, at the expense of Franchisee, which expense Franchisee shall pay upon demand.
- **14.12 Liquidated Damages.** If Franchisor terminates this Agreement based upon Franchisee's default (or if Franchisee purports to terminate this Agreement except as permitted under Section 14.8), then within 10 days thereafter Franchisee shall pay to Franchisor a lump sum (as liquidated damages and not as a penalty) calculated as follows: (a) the average Royalty Fees and Brand Marketing Fee Contributions that Franchisee owed to Franchisor under this Agreement for the 52 week period preceding the effective date of termination; multiplied by (y) the lesser of (1) two years or (2) the number of weeks remaining in the then-current term of this Agreement. If

![](_page_102_Picture_0.jpeg)

Franchisee had not operated the Business for at least 52 weeks, then (x) will equal the average Royalty Fees and Brand Marketing Fee Contributions that Franchisee owed to Franchisor during the period that Franchisee operated the Business. Franchisee acknowledges that a precise calculation of the full extent of Franchisor' damages under these circumstances is difficult to determine and the method of calculation of such damages as set forth in this Section is reasonable.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 60

What happens if the parties agree in writing to extend the 90-day mediation period for Ella Cafe?

Accepted Answer

If the parties are unable to resolve the claim, controversy, or dispute within 90 days after the mediator has been chosen, then, unless such time period is extended by written agreement of the parties, either party may institute legal proceedings pursuant to Section 14.3. Source: Item 23 — RECEIPTS (FDD pages 50–181)

Question 61

What happens if a person refuses to submit to a medical examination to determine 'Incapacity' under the Ella Cafe Franchise Agreement?

Accepted Answer

"**Incapacity**" means physical, emotional, or mental injury or illness which would prevent a person from performing the obligations set forth in this Agreement or in any guaranty made part of this Agreement for at least 90 consecutive days and from which the person suffering the incapacity is not likely to recover within 90 days from the date of determination of the incapacity, as determined by a licensed practicing physician upon examination of the person, or if the person refuses to submit to an examination, then such person automatically shall be deemed to be incapacitated as of the date of such refusal.

Source: Item 23 — RECEIPTS (FDD pages 50–181)

Question 62

For Ella Cafe, what happens if the Principal Executive does not attend the required training?

Accepted Answer

al Executive will be the individual Franchisee or one of the general partners. If Franchisee is a Business Entity, the Principal Executive will be an individual with at least a 10% equity interest in the Business Entity. The Principal Executive must have full control over day-to-day Coffee House management and operations. Unless a District manager is appointed, as described below: (a) the Principal Executive must attend and successfully complete Franchisor's initial training program and all additional training that Franchisor requires, to Franchisor's satisfaction; and (b) the Principal Executive must devote his or her full-time efforts to Coffee House operations and must not engage in any other business or activity, directly or indirectly, that requires substantial management responsibility or time commitment. Franchisor must approve the Principal Executive as meeting its then-current qualifications for such position. If the Principal Executive ceases to serve in, or no longer qualifies for, such position, or transfers his or her equity interest, Franchisee must designate another qualified person to serve as Franchisee's Principal Executive within 30 days after the date the prior Principal Executive ceases to serve or no longer qualifies to serve. Any proposed replacement Principal Executive must successfully complete the initial training program and such other training required by Franchisor and be approved by Franchisor before assuming his or her position as Principal Executive and, in no event, later than 90 days after the previous Principal Executive ceased to serve in such position.
- (b) If the Principal Executive will not devote full-time efforts to the management and operation of the Coffee House governed by this Agreement then, in addition to the Principal Executive, Franchisee must appoint an individual to serve as its District Manager. Franchisee's District Manager must have full control over day-to-day Coffee House management and operations.

Source: Item 22 — CONTRACTS (FDD page 50)

Question 63

For Ella Cafe, what happens if the Principal Executive ceases to serve or no longer qualifies for the position?

Accepted Answer

Franchisor must approve the Principal Executive as meeting its then-current qualifications for such position.

If the Principal Executive ceases to serve in, or no longer qualifies for, such position, or transfers his or equity interest, Developer must designate another qualified person to serve as Developer's Principal Executive within 30 days after the date the prior Principal Executive ceases to serve or no longer qualifies to serve.

Any proposed replacement Principal Executive must successfully complete the initial training program and such other training required by Franchisor and be approved by Franchisor before assuming his or her position as Principal Executive and, in no event, later than 90 days after the previous Principal Executive ceased to serve in such position.

- 5.1.2.

If the Principal Executive will not devote full-time efforts to the management of the business contemplated by this Agreement, then, in addition to the Principal Executive, Developer must appoint an individual to serve as its District Manager.

Developer's District Manager must have full control over Developer's development activities.

Developer's District Manager need not have an equity interest in the Business Entity, but must have completed Franchisor's initial training program and all additional training that Franchisor requires, to Franchisor's satisfaction.

Developer's District Manager must devote his or her full-time efforts to management of the development of Coffee House contemplated by this Agreement and must not engage in any other business or activity, directly or indirectly, that requires substantial management responsibility or time commitment.

If the District Manager ceases to serve in such position, Developer must designate another qualified person to serve as its District Manager within 30 days after the date the prior District Manager ceases to serve.

Any proposed replacement District Manager must

![](_page_133_Picture_0.jpeg)

successfully complete the initial training program and such other training required by Franchisor before assuming his or her position as District Manager and, in no event, later than 90 days after the previous District Manager ceased to serve in such position.

Source: Item 23 — RECEIPTS (FDD pages 50–181)

Question 64

What happens if a transferred Ella Cafe Coffee House ceases to be operated as a Coffee House?

Accepted Answer

However, if, during the Term of this Agreement, Developer transfers its interest in a Coffee House in accordance with the transfer provisions set forth in the applicable Franchise Agreement for the Coffee House, the transferred Coffee House will continue to be counted in determining whether or not Developer has complied with the Development Schedule, provided that such Coffee House continues to be operated as a Coffee House.

If the transferred Coffee House ceases to be operated as a Coffee House during the Term of this Agreement, Developer must develop a replacement Coffee House within a reasonable time (not to exceed 180 days) thereafter, otherwise, the Coffee House will not count toward Developer's Development Schedule obligations hereunder.

- 4.3.2.

Developer's failure to adhere to the Development Schedule (including any extensions thereof, approved by the Franchisor in writing) or to any time period for the development of replacement Coffee Houses is a material breach of this Agreement for which the Franchisee expressly acknowledges that the Franchisor may, at our sole discretion (i) terminate or modify any territorial protections granted to you, (ii) reduce the size of the Development Area, or (iii) reduce the number of Coffee Houses which you may establish under the Development Schedule.

Source: Item 23 — RECEIPTS (FDD pages 50–181)

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