What activities are prohibited during the non-compete period related to Ella Cafe?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
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
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.
- 10.3. Additional Provisions. The parties acknowledge and agree that Franchisor has the right, in its sole discretion, to reduce the scope of any covenant set forth in Sections 10.1. and 10.2., or any portion thereof, without Developer's consent or the consent of any Owner, effective immediately upon delivery of written notice to the affected party; and Developer and each Owner agree that such person will comply with any covenant as so modified.
Source: Item 23 — RECEIPTS (FDD pages 50–181)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, during the non-compete period, a franchisee is restricted from engaging in specific activities related to similar businesses. Specifically, the franchisee cannot directly or indirectly own, maintain, advise, operate, engage in, be employed by, make loans to, invest in, provide assistance to, or have any interest in or association with any casual, fast-casual, or quick-service coffee house, retail Coffee House, coffee/food truck, kiosk, cart, or store inside a store. This restriction applies to businesses that offer coffee and/or assorted café items as a primary menu item or derive more than 25% of their revenue from such sales.
This non-compete clause is in effect for a period of two years after the termination, expiration, or transfer of the Development Agreement. It applies to locations that are at the site of a former Ella Cafe location, within a five-mile radius of a former location, or within a five-mile radius of any other Ella Cafe operating under the Ella Cafe system and marks. These geographic restrictions extend to any area where Ella Cafe or its affiliates have used, sought registration of, or registered their trademarks, or operate or license others to operate under similar marks.
The restrictions also apply to departing owners of the Developer for a two-year period from the date they cease to be an owner. The time periods for these non-compete obligations will be suspended during any period of noncompliance, meaning any violation of the non-compete agreement will effectively extend the duration of the restriction. However, the restrictions do not apply to ownership of less than a five percent beneficial interest in the outstanding securities of any publicly-held corporation.