After the Ella Cafe agreement expires, does the non-compete apply to locations where Ella Cafe has sought registration of its marks?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
foregoing events or with respect to enforcement of this Section 13.2., and continuing for an uninterrupted period of two years thereafter, Franchisee 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, food truck, kiosk, cart, or store inside store of any type, that offers coffee and assorted café items as a primary menu item or that derives more than 25% of its revenue from the sale of coffee and assorted café items, other than an 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 Franchisee 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 13.2. will be tolled during any period of noncompliance.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, after the franchise agreement expires or terminates, a franchisee is subject to a non-compete agreement for two years. This agreement prevents the franchisee from engaging in or having an interest in any casual, fast-casual, or quick-service coffee house, retail coffee house, food truck, kiosk, cart, or store inside a store that offers coffee and cafe items as a primary menu item or derives more than 25% of its revenue from such sales.
The non-compete applies to locations (i) at the former location of the Ella Cafe, (ii) within a five-mile radius of the former location, or (iii) within a five-mile radius of any other Ella Cafe operating under the System and Marks. This restriction extends to any location within the United States, its territories, or commonwealths, or any other country, province, state, or geographic area in which Ella Cafe 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.
For a prospective Ella Cafe franchisee, this means that upon termination or expiration of the franchise agreement, they will be restricted from operating a competing coffee business within specified geographic areas. This includes areas near their former location and near any other Ella Cafe location, as well as areas where Ella Cafe has registered or sought to register its trademarks. This restriction lasts for two years, potentially limiting the franchisee's ability to start a similar business in a location where Ella Cafe has established or intends to establish a presence. The time periods relating to the obligations described in this Section 13.2. will be tolled during any period of noncompliance.